Dubai Updates Crypto Rules: No Privacy Tokens, New Stablecoin Standards

TLDR

• The DFSA has banned all privacy tokens from use within the Dubai International Financial Centre.
• The new rules prohibit mixers, tumblers, and tools that obscure crypto transaction data.
• Licensed firms must now assess and approve the crypto tokens they offer, replacing DFSA’s approval list.
• Stablecoins are now limited to fiat-backed tokens with high-quality, liquid reserves for stress redemption.
• Algorithmic stablecoins like Ethena are excluded from Dubai’s stablecoin definition but are not banned.

Dubai has enforced new crypto regulations that ban privacy tokens within its financial free zone, the DIFC. The Dubai Financial Services Authority (DFSA) also shifted the responsibility for token approvals to licensed firms. The rules introduce stricter guidelines around stablecoins and prohibit privacy-enhancing tools such as mixers and tumblers.

Privacy Tokens Face Full Restriction in the DIFC

The DFSA has prohibited the use, trading, promotion, or derivative activity involving privacy tokens in or from the DIFC. The ban covers assets that anonymize holders or transaction history, such as Monero (XMR) and Zcash (ZEC). This measure comes as part of compliance with Financial Action Task Force (FATF) standards.

Elizabeth Wallace, DFSA associate director, said the restrictions were essential for AML compliance, stating, “It’s nearly impossible to comply if trading privacy tokens.” The FATF requires firms to identify both the originator and the beneficiary of each transaction. Wallace explained that privacy tokens do not allow that traceability to take place.

She added that most anti-money laundering requirements cannot be satisfied when firms use tokens designed to hide user activity. The ban applies directly to licensed entities under the DFSA, targeting privacy coins and associated tools. These include mixers, tumblers, and obfuscation software used to conceal transaction data.

The updated rules now fully align the DFSA’s stance with international regulatory efforts against anonymous crypto activity. Unlike Dubai, Hong Kong permits privacy tokens under a high-bar licensing regime. The European Union is also enforcing measures through MiCA and an upcoming anti-anonymity regulation.

DFSA Revises Stablecoin Definition Under New Rules

The DFSA also changed how it categorizes stablecoins, now calling them Fiat Crypto Tokens under tightened criteria. These tokens must be backed by high-quality and liquid assets tied to fiat currency reserves. The new definition limits the category to those that can fulfill redemptions under stress conditions.

Wallace said algorithmic stablecoins, such as Ethena, do not meet these requirements under the revised rules. “In our regime, Ethena wouldn’t be considered a stablecoin,” she confirmed. The token would instead fall under general crypto assets without stablecoin classification. Wallace added that the focus is on ensuring redemption is possible and that reserves are transparent and liquid.

The rule targets redemption quality rather than outright banning algorithmic tokens, which are still allowed as long as firms disclose their risk. Dubai’s approach now mirrors global regulatory focus on asset-backed stablecoins and liquidity safeguards.