Dubai crypto rules tighten as DFSA bans privacy tokens and rewrites approval process

• Dubai’s financial regulator has banned privacy tokens across the DIFC from Jan. 12.
• Stablecoins must now be fiat-pegged and backed by high-quality, liquid assets.
• Algorithmic stablecoins like Ethena are excluded from the stablecoin category.

Dubai’s financial regulator has rolled out a major update to its crypto rulebook, drawing a clear red line around privacy tokens while changing how digital assets are approved inside the Dubai International Financial Centre.

The revised Crypto Token Regulatory Framework, effective Jan. 12, reflects a broader shift in regulatory philosophy.

Privacy tokens banned

Under the updated framework, privacy tokens are prohibited across the DIFC.

The ban covers assets designed to conceal transaction histories or wallet holders, as well as any related financial activity.

This includes trading, marketing, fund exposure, and derivatives referencing such tokens.

The decision arrives at a time when privacy coins have attracted fresh attention from traders.

Monero XMR recently crossed an all-time high, and tokens such as ZEC have also seen increased activity.

Despite this, the DFSA views the risks as incompatible with global compliance obligations.

The regulator’s position is rooted in Financial Action Task Force standards, which require firms to identify both the originator and beneficiary of crypto transactions.

Privacy tokens, by design, make this level of transparency difficult to achieve.

As a result, the DFSA considers their use inconsistent with anti-money laundering and financial crime controls expected of regulated firms.

Mixers and obfuscation tools

The prohibition extends beyond tokens themselves.

Regulated firms in the DIFC are also barred from using or offering privacy-enhancing devices such as mixers, tumblers, or other obfuscation tools that hide transaction details.

This places Dubai closer to the most restrictive global approaches.

While Hong Kong technically permits privacy tokens under a risk-based licensing model that limits their practical use.

Through MiCA rules and an upcoming AML ban on anonymous crypto activity, privacy coins and mixers are effectively being pushed out of regulated European markets.

Stablecoin definition tightened

Stablecoins are another central focus of the revised rules.

The DFSA has narrowed the definition of what it calls Fiat Crypto Tokens, limiting the category to tokens pegged to fiat currencies and backed by high-quality, liquid assets.

These reserves must be capable of meeting redemption demands even during periods of market stress.

Algorithmic stablecoins fall outside this definition due to concerns around transparency and redemption mechanics.

Tokens such as Ethena, despite their rapid growth, would not qualify as stablecoins under the DIFC framework.

They are not banned but would be regulated as standard crypto tokens rather than fiat-backed instruments.

Firms take responsibility

A significant structural change in the framework shifts token approval responsibility to industry participants.

Instead of maintaining a regulator-approved list of crypto assets, the DFSA will require licensed firms to determine whether the tokens they offer are suitable and compliant.

Firms must document these assessments and keep them under continuous review. The change reflects feedback from the industry and the regulator’s view that the market has matured.

It also aligns with international regulatory thinking that asset selection decisions should rest with firms, with supervisors focusing on oversight and enforcement rather than approvals.

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