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Saudi Arabia. Riyadh Saudi Capital. Phot by Flickr user Anne and David. October 24, 2022. Used under license Public Domain Mark 1.0 Universal, https://creativecommons.org/publicdomain/mark/1.0/.

FALQs: Regulation of Cryptocurrencies in the Gulf Cooperation Council Countries – Part One

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The following is the first installment of a two-part guest post on Cryptocurrencies in the GCC by Muneera Al-Khalifa, legal research fellow, working with Foreign Law Specialist George Sadek at the Global Legal Research Directorate of the Law Library of Congress. This post is part of our Frequently Asked Legal Questions (FALQs) series.

Cryptocurrencies have gained significant regulatory importance both globally and within the Gulf Cooperation Council (GCC) member states. Key factors contributing to this importance include regulatory compliance, consumer protection, taxation, prevention of financial crimes, and facilitation of cross-border transactions.

The regulatory landscape for cryptocurrencies across the GCC member states varies significantly. This blog consists of two parts. The first part of this blog explores the regulatory frameworks of the United Arab Emirates, Saudi Arabia, and Bahrain. The second part focuses on the approaches adopted by Qatar, Kuwait, and Oman.

1. How are cryptocurrencies regulated in the UAE?

The United Arab Emirates (UAE) has enacted several laws and regulations governing cryptocurrencies.

Federal Laws and Regulations

The Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering, Combating the Financing of Terrorism, and Financing of Illegal Organizations, as amended, defines virtual assets (including crypto-currencies) and virtual asset service providers (“VASPs”). Furthermore, the broad definition of “funds” in Article (1) of the Law implies the inclusion of such assets, regardless of the method of acquisition. The definition explicitly encompasses tangible and intangible assets, including those in “digital or encrypted” forms.

By incorporating these definitions, the Decree-Law subjects virtual assets and VASPs to the UAE’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) laws and regulations. This ensures that entities dealing with cryptocurrencies adhere to the same stringent standards as traditional financial institutions. These standards include implementing robust customer due diligence measures, monitoring and reporting suspicious transactions, and maintaining comprehensive records for a specified duration. Furthermore, article (16)BIS of the Decree-Law prohibits both natural and legal persons from engaging in activities as VASPs without obtaining a license from the competent regulatory authorities. The obligations of VASP are specified in the Executive Regulation of Federal Decree-Law No. (20) of 2018, the Executive Regulation shall govern the obligations of VASPs.

In March of 2022, Cabinet Resolution No. (24) of 2022 was issued to amend some provisions of Cabinet Resolution No. (10) of 2019 on the Executive Regulation of Federal Decree-Law No. (20) of 2018 (the Federal Decree-Law and the modified Resolution of 2022 refers to it as “Executive Regulation,” because the original source is in Arabic, translations of the terms may differ while holding the same meaning). The amendments broaden the scope of key terms, such as “funds,” “virtual assets,” and “VASPs,” to include emerging financial instruments and service providers. This amended Cabinet Resolution of 2022 strengthens supervisory authority and enhances the obligation for risk assessment and ongoing monitoring of business relationships and transactions. It also specifies reporting requirements of suspicious transactions to the Financial Intelligence Unit, clarifies record-keeping obligations, and establishes administrative penalties and sanctions for non-compliance. It is important to note that this Cabinet Resolution does not exclusively regulate VASPs. Instead, it primarily addresses AML/CFT measures across various sectors, including virtual assets, by amending existing regulations.

In 2020, the UAE’s Security and Commodities Authority (SCA) issued Decision No. (23) of 2020 regarding the crypto assets Activities Regulation. This regulation aims to govern the offering, issuing, listing, and trading of crypto assets within the UAE. It requires entities engaging in crypto asset activities to obtain the necessary approvals and licenses from the SCA. The SCA conducts enhanced due diligence procedures following AML/CFT controls. These procedures apply to all individuals and entities applying for licenses and/or approvals under this regulation. In 2021, the SCA also issued Administrative Decision No. (11) of 2021, providing guidance for crypto asset regulations. This regulation applies to most forms of crypto assets in the UAE, whether classified as securities or otherwise, as long as they are listed and available for trading on an organized market.

In December 2022, to further enhance the regulatory environment for virtual assets, the UAE Cabinet issued a dedicated framework for this sector, Cabinet Resolution No. (111) of 2022, regulating virtual assets and the related service providers. This resolution covers a broader range of virtual assets and related services, offering a more comprehensive regulatory approach across the UAE, including free zones. It designates SCA as the primary regulator while also involving local licensing authorities to promote a coordinated regulatory environment. Article (4) of the resolution prohibits any person from engaging in virtual asset activities within the UAE, including free zones, without obtaining approval and a license from either the SCA or the relevant local licensing authorities. Its primary objectives include:

  1. Developing a legislative framework for the virtual assets sector, related activities, and VASPs in the UAE to clearly define and protect the rights and responsibilities of all stakeholders;
  2. Regulating the virtual assets sector, related activities, and VASPs through mandatory licensing requirements;
  3. Ensuring compliance with Federal Decree-Law No. (20) of 2018, as amended, its Executive Regulation, as well as applicable legislation governing the virtual assets sector;
  4. Supporting the UAE government’s efforts to attract international companies operating in the virtual assets sector; and
  5. Protecting investors in the virtual assets sector from illegal practices.

Additionally, in February of 2023, the UAE’s Central Bank issued comprehensive guidance for licensed financial institutions on managing risks related to virtual assets and VASPs. The guidance aims to assist licensed financial institutions in understanding the associated risks and effectively fulfilling their statutory obligations related to AML/CFT controls. It outlines measures such as customer due diligence and enhanced due diligence requirements for engaging with potential VASP customers and counterparties. It also emphasizes the importance of mitigating associated risks, supporting institutions with training programs, and providing a framework for governance and record-keeping obligations.

In October 2024, according to Cabinet Decision No. (100) of 2024, the UAE amended the Executive Regulation of Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT). Effective November 15, 2024, most transactions involving virtual assets, including cryptocurrencies, are exempt from the standard 5% VAT. According to article (42) of the Executive Regulation, this exemption applies to activities such as the transfer of ownership of virtual assets (including virtual currencies), as well as the custody, management, and conversion of virtual assets. However, services related to virtual assets that involve explicit fees, commissions, discounts, rebates, or similar charges remain subject to VAT. Emirates within the UAE have also enacted their own emirate specific laws and regulations governing cryptocurrencies, including Abu Dhabi, Dubai, and Ras Al Khaimah.

2. How are cryptocurrencies regulated in Saudi Arabia

The Kingdom of Saudi Arabia adopts a cautious approach toward cryptocurrencies. As of December 2024, Saudi Arabia has not enacted specific legislation governing cryptocurrencies. While it is not explicitly prohibited, cryptocurrencies lack formal legal recognition and are operated under a risk-averse regulatory framework by the Saudi Central Bank, formerly known as the Saudi Arabian Monetary Authority (SAMA), and the Capital Market Authority (CMA).

SAMA has issued several warnings about the risks associated with cryptocurrencies. Notably, in 2018, the Standing Committee for Awareness on Dealing in Securities Activities in the Unauthorized Foreign Exchange Market (Forex), which includes SAMA, issued a warning. It highlighted the significant risks and potential negative consequences for traders due to the lack of government supervision over virtual currencies. Additionally, in 2019, the Ministry of Finance issued a similar warning, advising against dealing in or investing in virtual currencies, including cryptocurrencies, as they are neither legally recognized nor regulated by any official entities in Saudi Arabia.

The Anti-Money Laundering Law (AML), promulgated by Royal Decree No. (M/20) on Oct. 25, 2017, and the Law on Combating Terrorist Crimes and its Financing (CFT), promulgated by Royal Decree No. (M/21) on Nov. 1, 2017, do not explicitly mention crypto assets. However, the broad definition of “funds” in both laws suggests that such assets are included, as the definition encompasses tangible and intangible assets, economic resources, or properties of any value or type, regardless of how they are acquired, including those obtained through “electronic or digital systems.”

Article 1(4) of the Implementing Regulations of the CFT law states that financial activities or transactions regulated under the Law include “electronic currencies.” Although the implementing regulations do not explicitly define “electronic currencies,” the term is generally understood to cover digital forms of currency, including cryptocurrencies. While individual ownership and trading of cryptocurrencies are not explicitly banned, they are not traded by local financial institutions as they are not recognized by legal entities in Saudi Arabia.

3. How are cryptocurrencies regulated in Bahrain

The Kingdom of Bahrain has taken a proactive stance toward cryptocurrencies. It has implemented comprehensive frameworks to foster innovation while ensuring compliance with anti-money laundering regulations, market integrity, and investor protection.

Legislative Decree No. (4) of 2021 amended Legislative Decree No. (4) of 2001 on Anti-Money Laundering and Combating the Financing of Terrorism. The amendment revised the term “money” in article 1(a) to include all assets, property, economic resources, and things of value, whether tangible or intangible. This expanded definition explicitly includes “digital currencies” and “virtual assets,” such as cryptocurrencies. By incorporating this definition, the law subjects digital currencies and virtual assets to Bahrain’s AML/CFT regulations. This ensures that entities dealing with cryptocurrencies adhere to the same stringent standards as traditional financial institutions.

The Central Bank of Bahrain (CBB) oversees the regulatory framework for cryptocurrencies, ensuring that crypto-asset activities adhere to international standards and best practices. In February 2019, the CBB introduced its Crypto-Asset Module to establish comprehensive regulatory and supervisory measures for activities involving crypto-assets. In 2023, the CBB amended the Crypto-Asset Module to include “Digital Token Offerings” and broadened the scope of the licensees’ activities.

The Crypto-Asset Module governs a wide range of crypto-asset-related activities, including the licensing (CRA 1.1.8) and supervision of crypto-asset exchanges in Bahrain, as well as other services such as trading, dealing, advisory services, and portfolio management of crypto-assets. It also regulates technology governance and cybersecurity, risk management, AML/CFT requirements, crypto-asset custody services, corporate governance, prevention of market abuse and manipulation, and reporting, notifications, and approvals. This crypto-asset module must be applied alongside other sections of the CBB Rulebook to ensure a holistic understanding of the applicable rules and guidelines. These include provisions on high-level controls (corporate governance), market intermediaries and representatives, AML/CFT controls, and international cooperation and exchange of information.

In Bahrain, the application of VAT to cryptocurrencies varies depending on the type of transaction. The National Bureau of Revenue’s VAT Financial Services Guide on Credit and Financing Services (Version 1.3), which took effect on January 1, 2022, outlines specific guidelines regarding the VAT applicable for four types of tokens recognized in Bahrain. These tokens include payment tokens (or cryptocurrencies), utility tokens, asset tokens, and hybrid tokens. The following applies to payment tokens (or cryptocurrencies):

  • Mining Rewards: Tokens received by miners for their mining activities are outside the scope of VAT. This exemption arises because mining is not considered an economic activity, due to the insufficient link between the service provided and consideration received.
  • Exchange for Legal Tender or Other Tokens: Exempt from VAT, as these transactions are classified as financial services.
  • Used to Acquire Goods or Services: Exempt from VAT, as these tokens function solely as a means of payment.
  • Supply of Goods and Services Paid with Tokens: Subject to VAT under applicable laws and regulations, as they are treated the same way as transactions remunerated in traditional currencies.
  • Charges Over and Above Token Value (e.g., fees, and commissions): Exempt from VAT unless the consideration is expressly categorized as a fee, commission, or commercial discount; in such cases, the supply will be subject to VAT.

For VAT compliance purposes, when converting payment token cryptocurrencies to Bahraini Dinars, the exchange rate used must be the rate published on the CBB website.

4. Where can I find additional resources? 

The Law Library has written a report, and updated it, on the regulation of cryptocurrencies around the world.

For additional legal development in the above-mentioned jurisdictions, visit the Law Library resource, the Global Legal Monitor, which also includes subject-specific topics.

If you have a question regarding Bahrani, Saudi, or UAE law, you can also submit it using the Ask a Librarian form on our website.


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