Population: 9 million

Wealth in domestic bank deposits: 654 billion USD (August 2023)

Offshore expatriated wealth: 71.4 billion USD

Main offshore banking locations: N/A

Number of individual brokerage accounts: NA

Crypto adoption (% of population): 2.8 million (30%)

TLDR

The UAE has one of the most developed and open financial systems in the Middle East region. There are no exchange controls, allowing free flow of currency. The UAE allows marketing of foreign funds and securities to professional investors. The country has made major strides in regulating cryptocurrencies by establishing the Virtual Asset Regulatory Authority (VARA). Overall, the environment is conducive to international business and investments.

Exchange controls

There are no exchange control restrictions in the UAE. Residents and non-residents can hold fully convertible AED or foreign currency accounts onshore and offshore. The UAE Dirham is pegged to the US Dollar.

Distribution rules for foreign investment products

The regulations for marketing and selling foreign financial products in the UAE have seen major changes with the introduction of amendments to the SCA’s Financial Activities Rulebook in 2023.

Foreign professional investor funds can now be promoted in mainland UAE to professional investors on a private placement basis, but only by an SCA-licensed entity with prior SCA approval. Public offerings of foreign retail investor funds are prohibited in mainland UAE, but feeder funds targeting UAE retail investors are permitted under certain conditions.

To market a foreign fund to UAE professional investors, the fund must register with the SCA through an online portal, paying a reduced fee of AED 12,000 and receiving approval within 5 days typically. Registration exemptions apply for certain funds like those under the ADGM/DIFC passporting regime.

The new rules limit distribution of foreign funds to private placements for professional investors and market counterparties only. Licensed distributors must disclose the SCA’s latest decisions to clients, abide by agreements, and comply with promoter obligations in the Rulebook.

Qualified investors

The UAE Securities and Commodities Authority (SCA) has a specific definition of qualified investors, who can access a wider range of products with fewer restrictions.

Qualified investors include government entities like UAE, foreign governments and international organizations. They also include UAE corporate entities meeting financial criteria such as having a budget of AED 75 million, net annual profit of AED 150 million, or capital of AED 7 million.

Individuals accredited by the SCA or similar regulators are considered qualified investors too. They must have net assets excluding main residence of at least AED 4 million, or an annual income over AED 1 million. These individuals must also declare knowledge and experience in investing and its risks.

When a foreign fund is offered to a qualified investor, the SCA-licensed promoter does not need to market it as a private offering in the UAE.

Non-qualified investors face more restrictions to protect them given potential lack of investing experience. They can access public funds established in the UAE with caps on foreign securities, derivatives etc. Public mutual funds need SCA approval of prospectus before marketing.

Key investor protections include SCA/Central Bank oversight of online trading, preventive mechanisms against losses, complaint abilities, and requirements for brokers like capitalization, dispute resolution, information disclosure and keeping funds in segregated accounts. The SCA regularly reviews broker compliance, capital levels, AML/KYC to prevent fraud.

Cryptocurrency regulation

The UAE, especially Dubai, has become a leading global crypto hub since establishing the independent Virtual Asset Regulatory Authority (VARA) in March 2022. VARA provides legal clarity to promote crypto industry growth. This attracted major players like Binance and WazirX to Dubai, supporting its goal to be a top financial center.

VARA emerged after 2014 consultations between IBM and Dubai on blockchain, leading to initial crypto framework efforts in 2016 and VARA’s formation in 2022.

Beyond VARA, the UAE government unveiled the Dubai Metaverse Strategy to position the country among the top 10 metaverse economies by 2030. This involves attracting 1000 blockchain and metaverse companies and creating 40,000 virtual jobs.