UAE's New Law Sparks 'Bitcoin Ban' Fears: Harsh Penalties on Unlicensed Crypto Tools

The United Arab Emirates (UAE) has introduced sweeping new regulations that have ignited fears of a de facto Bitcoin ban, with developers warning that basic cryptocurrency tools, including self-custody wallets, now risk criminal penalties without Central Bank licensing. The UAE new law, Federal Decree-Law No. 6 of 2025, effective September 16, replaces the 2018 banking statute and dramatically expands oversight of digital assets, treating unlicensed activities as serious offenses.

The Law’s Scope: Criminalizing Unlicensed Crypto Infrastructure

The legislation mandates Central Bank licensing for any entity offering cryptocurrency-related services, including Bitcoin wallets, blockchain explorers, APIs, and analytics platforms accessible to UAE residents. Article 170 criminalizes unlicensed financial activities, with penalties including imprisonment and fines from AED 50,000 to AED 500 million—up to $136 million. Article 62 empowers the Central Bank to regulate technology providers facilitating financial products, while Article 61 prohibits promoting unlicensed crypto without authorization, potentially covering emails, websites, or social media posts.

Legal analysis from Gibson Dunn highlights that the law’s broad language extends to foreign entities if their services reach UAE users, overriding free-zone rules like those in Dubai’s VARA or Abu Dhabi’s ADGM. This federal override applies nationwide, even in crypto-friendly hubs.

• Key Provisions: Licensing for wallets, explorers, APIs; fines up to $136M; 1-year compliance window.
• Extraterritorial Reach: Applies to global providers serving UAE residents.
• Effective Date: September 16, 2025.

Developer and Industry Reactions: De Facto Ban on Self-Custody?

Crypto developers have reacted with alarm, viewing the law as a de facto Bitcoin ban on self-custody. Mikko Ohtamaa, co-founder of Trading Protocol, posted on X: “I have bad news for all crypto habibis in Dubai, it’s real.” The rules could force wallet providers and explorers to geoblock UAE users or exit the market, echoing FATF pressures on high-risk jurisdictions to curb self-custody.

Stani Kulechov, Aave founder, called it “concerning,” noting potential impacts on DeFi and basic tools. The law’s alignment with UAE’s history of digital restrictions—such as blocking WhatsApp calls—raises doubts about Dubai’s status as a global crypto hub.

• Developer Concerns: Geoblocking or market withdrawal; self-custody at risk.
• Industry View: Consistent with FATF anti-self-custody push.
• Broader Context: UAE’s past crypto-friendly licensing now overridden federally.

Implications for UAE’s Crypto Landscape

The UAE, a top crypto destination with $10 billion+ in annual inflows, faces potential exodus of developers and users. Free zones like VARA in Dubai offered innovation sandboxes, but federal supremacy applies the new rules everywhere. A one-year compliance window ends September 2026, giving firms time to adapt or retreat.

This follows global trends, such as MiCA in the EU and India’s 30% crypto tax, but the UAE’s harsh penalties stand out. Bitcoin’s $95,568 price and $2.1 trillion market cap remain unaffected short-term, but long-term user migration could impact regional liquidity.

In summary, the UAE’s new law, with fines up to $136 million for unlicensed crypto tools like Bitcoin wallets, sparks fears of a self-custody ban, potentially reshaping Dubai’s crypto hub status amid a one-year compliance deadline.