UAE SCA Onshore Virtual Asset Guidance Baker McKenzie analyzes the UAE Securities and Commodities Authority (SCA) regulatory framework for virtual asset activities conducted in UAE onshore territory outside of free zones like DIFC and ADGM.
Effective 2023
Source: Baker McKenzie

What Is the SCA?

The Securities and Commodities Authority (SCA) is the UAE's federal regulator for securities and commodities markets. SCA has jurisdiction over virtual asset activities conducted onshore in the UAE—that is, outside of the financial free zones (DIFC, ADGM) and Dubai's VARA-regulated territory.

SCA's virtual asset framework applies to entities operating from or offering services to the broader UAE market outside of free zone boundaries.

What Is SCA's Regulatory Scope?

Geographic Jurisdiction

  • UAE onshore territory (excluding free zones)
  • All emirates except Dubai (where VARA applies)
  • Federal-level regulation
  • Complements rather than competes with free zone regulators

Jurisdictional Complexity

  • Dubai outside DIFC: VARA jurisdiction
  • DIFC: DFSA jurisdiction
  • ADGM: FSRA jurisdiction
  • UAE onshore (other emirates): SCA jurisdiction
  • Payment tokens UAE-wide: CBUAE jurisdiction

What Activities Does SCA Regulate?

Covered Activities

  • Operating virtual asset trading platforms
  • Providing virtual asset custody services
  • Virtual asset brokerage and dealing
  • Advising on virtual asset investments
  • Marketing virtual assets in UAE onshore territory

Token Classification

  • Security tokens treated as securities
  • Investment tokens subject to investment regulations
  • Utility tokens may have lighter treatment
  • Payment tokens coordinated with CBUAE

What Are SCA's Licensing Requirements?

Authorization Process

  • Application to SCA for virtual asset service provider license
  • Business plan and operational model review
  • Fit and proper assessment for key personnel
  • Capital adequacy requirements
  • Technology and security standards

Compliance Requirements

  • AML/CFT framework aligned with UAE federal requirements
  • Customer protection measures
  • Market conduct and integrity rules
  • Reporting and disclosure obligations
  • Coordination with other UAE regulators as needed

Operational Standards

  • Risk management framework
  • Internal controls and audit
  • Cybersecurity requirements
  • Business continuity planning

How Does SCA Treat Stablecoins?

Classification Considerations

  • Stablecoins used as investment instruments fall under SCA
  • Payment-focused stablecoins primarily under CBUAE
  • Trading and custody activities require SCA authorization
  • Issuance may require multiple regulatory approvals

CBUAE Coordination

  • CBUAE Payment Token Services Regulation is primary for payment stablecoins
  • SCA regulates investment-focused stablecoin activities
  • Dual authorization may be required depending on use case
  • Clear delineation between "money" and "investment" use

What Should Financial Institutions Consider?

  • SCA applies to UAE onshore operations outside free zones
  • Most international firms prefer free zone licensing (DIFC, ADGM, VARA)
  • SCA relevant for entities with existing UAE onshore presence
  • Coordination with CBUAE essential for stablecoin activities
  • UAE regulatory landscape requires careful jurisdictional mapping
  • Local legal counsel essential for navigating multi-regulator environment

The Coinbax Perspective

SCA's onshore jurisdiction is often overlooked in discussions of UAE crypto regulation, which tend to focus on VARA, DIFC, and ADGM. However, SCA remains relevant for entities with existing UAE onshore operations or those targeting the broader UAE market from outside free zones.

Baker McKenzie's guidance helps clarify the SCA's role in the complex UAE regulatory landscape. The key insight is understanding when SCA jurisdiction applies versus the free zone regulators—geographic location and business model are determinative.

For most international financial institutions, free zone licensing (DIFC, ADGM, or VARA) is the preferred path. SCA licensing may be relevant for entities with specific UAE onshore commercial reasons or existing federal licenses they wish to expand.

Frequently Asked Questions

When does SCA jurisdiction apply instead of VARA?

SCA applies to UAE onshore territory outside of Dubai. VARA regulates Dubai (excluding DIFC). If your operations are physically located in emirates other than Dubai, or you're serving clients there without a free zone license, SCA jurisdiction may apply.

Should I choose SCA licensing over free zone options?

Most international firms choose free zone licensing (DIFC, ADGM, VARA) for their established frameworks and international recognition. SCA licensing is typically relevant for entities with existing UAE onshore operations or specific commercial reasons to operate federally.

How does SCA coordinate with CBUAE on stablecoins?

CBUAE has primary authority over payment tokens used for money transmission. SCA regulates investment-focused virtual asset activities. The use case determines which regulator is primary—payment/remittance points to CBUAE, investment/trading points to SCA (or free zone regulators).