The Rising Trend of Crypto Acquisitions in Dubai: What Every Buyer Must Know

Dubai has positioned itself as a global leader in cryptocurrency and blockchain business, drawing interest from investors, venture capitalists, and corporations looking to acquire established crypto companies. The emirate’s progressive regulatory environment, tax benefits, and technological infrastructure have made it a preferred destination for virtual asset service providers (VASPs). 

However, acquiring a crypto company in Dubai is not straightforward. Stringent regulations, complex licensing requirements, and compliance obligations must be carefully navigated. Any oversight or failure to comply with the legal framework could result in regulatory penalties, financial losses, or even license revocation. 

This article provides a comprehensive legal guide for businesses and investors looking to acquire crypto companies in Dubai. It covers licensing, compliance, anti-money laundering (AML) obligations, corporate governance, cybersecurity risks, taxation, and financial due diligence. 

1. Understanding the Regulatory Framework for Crypto Companies in Dubai 

Dubai’s legal framework for virtual assets is highly regulated and well-defined. Depending on their jurisdiction and nature of operations, crypto businesses are regulated by different authorities. 

A. Virtual Assets Regulatory Authority (VARA) 

The Virtual Assets Regulatory Authority (VARA), established under Law No. (4) of 2022, is the primary regulatory body for crypto companies in Dubai (excluding the DIFC). VARA is responsible for: 

1. Issuing licenses and regulating Virtual Asset Service Providers (VASPs). 

2. Overseeing compliance with the Virtual Assets and Related Activities Regulations 2023. 

3. Monitoring trading platforms, custody services, broker-dealer activities, and lending services. 

4. Enforcing penalties and regulatory actions against non-compliance. 

Crypto businesses licensed by VARA must comply with several rulebooks, including: 

1. Company Rulebook – Governing corporate governance, business operations, and legal structuring. 

2. Compliance and Risk Management Rulebook – Addressing AML obligations, fraud prevention, and risk controls. 

3. Exchange Services Rulebook – Regulating crypto exchanges and trading platforms. 

4. Market Conduct Rulebook – Ensuring transparency and consumer protection in crypto transactions. 

B. Securities and Commodities Authority (SCA) 

The Securities and Commodities Authority (SCA) governs crypto businesses that operate outside VARA’s jurisdiction, including the UAE mainland and certain free zones. Under Cabinet Resolution No. (111) of 2022, the SCA regulates: 

1. Crypto exchanges and trading platforms. 

2. Virtual asset brokerage and investment advisory services. 

3. Custody services for digital assets. 

C. Free Zone Jurisdictions: DIFC and ADGM 

Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) have independent regulatory frameworks: 

1. DIFC: Regulated by the Dubai Financial Services Authority (DFSA). 

2. ADGM: Regulated by the Financial Services Regulatory Authority (FSRA). 

A prospective buyer must determine which authority governs the target company and ensure compliance with the relevant licensing requirements. 

2. Due Diligence in Crypto Company Acquisitions 

Due diligence is one of the most critical aspects of acquiring a crypto company. A comprehensive legal, financial, and regulatory assessment is essential to mitigate risks. 

A. Licensing Verification 

Before acquiring a crypto company, confirm: 

1. That the company holds a valid VARA or SCA license. 

2. The scope of its license and whether it covers its actual business operations. 

3. Compliance with ongoing regulatory requirements, including renewal obligations. 

Acquiring a non-compliant or improperly licensed entity could lead to regulatory penalties or even forced closure. 

B. Compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) Laws 

Crypto companies in Dubai are subject to strict AML/CFT laws under Federal Decree-Law No. (20) of 2018 and Cabinet Decision No. (10) of 2019. Acquirers must ensure that the target company: 

1. Has implemented robust AML policies and follows Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures. 

2. Has no history of compliance violations or pending investigations from regulators such as VARA or the UAE Central Bank. 

3. Complies with the "Travel Rule" (FATF standards for virtual asset transfers). 

Failure to meet AML obligations can result in heavy fines, reputational damage, and regulatory bans. 

C. Ownership Transfer and Corporate Governance Requirements 

1. Pre-Approval from Regulators: Acquiring a major stake (25% or more) requires pre-approval from VARA or SCA. 

2. Ultimate Beneficial Ownership (UBO) Reporting: As per Cabinet Resolution No. (58) of 2020, buyers must disclose UBOs to regulators. 

3. Governance Compliance: VARA’s Company Rulebook outlines governance requirements for VASPs, including board composition, audit obligations, and compliance measures. 

3. Key Legal Risks and Liabilities in Crypto Mergers & Acquisitions 

 

A. Cybersecurity and Technology Due Diligence 

Given the high risk of cyber threats in crypto businesses, a thorough review of IT infrastructure is essential. Acquirers must assess: 

1. Smart contract security audits to prevent vulnerabilities. 

2. Data protection compliance under the Technology and Information Rulebook. 

3. Risk of past hacks, security breaches, or wallet vulnerabilities. 

B. Financial and Taxation Considerations 

Under Federal Decree-Law No. (47) of 2022 on Corporate Tax, crypto companies are subject to 9% corporate tax on profits. Due diligence should include: 

1. Review of tax filings, unpaid liabilities, and VAT compliance under Federal Decree-Law No. (8) of 2017. 

2. Transfer pricing policies for international operations. 

3. Unreported financial obligations that could impact post-acquisition financials. 

C. Marketing and Consumer Protection Compliance 

Crypto businesses must comply with VARA’s Market Conduct Rulebook, which regulates: 

1. Restrictions on misleading advertising and investment claims. 

2. Disclosure of risks associated with virtual asset transactions. 

3. Fair trading practices to protect consumers from fraud. 

A review of past marketing practices is essential to avoid future legal claims or reputational risks. 

Conclusion  

The acquisition of a crypto company in Dubai can be a highly lucrative investment, but it requires meticulous legal and regulatory due diligence. Investors and acquirers must: 

1. Verify licensing and regulatory compliance. 

2. Assess AML, corporate governance, and cybersecurity risks. 

3. Ensure financial, taxation, and legal obligations are met. 

4. Obtain regulatory approvals before finalizing the acquisition. 

By adopting a structured legal approach, acquirers can seamlessly enter the UAE’s virtual assets market while mitigating legal and regulatory risks.