Dubai, a major hub in the UAE’s crypto ecosystem, recently tightened the regulations on privacy coins (also called anonymity-enhanced cryptocurrencies such as Monero (XMR) and Zcash (ZEC)). These updates are aimed at strengthening anti-money laundering (AML) controls, aligning with global standards set by the Financial Action Task Force (FATF), and reducing risks tied to sanctions evasion.

I’ll be making a clear breakdown of the most recent developments, focusing on Dubai-specific rules, with some broader UAE context where relevant.

DFSA Ban on Privacy Tokens in the DIFC

The Dubai Financial Services Authority (DFSA), which regulates the Dubai International Financial Centre (DIFC), announced a full ban on privacy tokens as part of amendments to its Crypto Token Regulatory Framework this last week.

• Effective date: January 12, 2026
  
• Background: The decision followed consultations and regulatory amendments released in December 2025.
  

Scope of the Ban

The ban applies to all activities involving privacy-focused assets, including:

• Trading and promotion
  
• Fund and asset management
  
• Derivatives and structured products
  
• Tools that enhance anonymity, such as mixers and tumblers
  

The DFSA considers privacy tokens incompatible with global compliance norms, as they can obscure transaction trails and make AML checks and sanctions screening difficult.

Other Key Framework Changes

• Token Vetting Shift:
  
  Token assessment responsibility now sits with licensed firms, not the DFSA. Firms must perform internal due diligence, classify tokens correctly, and ensure suitability for clients.
  
• Stablecoin Rules Tightened:
  
  Stablecoins must now be fully fiat-backed with high-quality, liquid reserves.
  
  Algorithmic stablecoins are excluded from this definition (though not outright banned) and may face heavier scrutiny.
  
• Practical Impact:
  
  DIFC-licensed entities must update compliance programs immediately.
  
  Privacy coins like XMR and ZEC are effectively excluded from the DIFC market, which could reduce local liquidity.
  
  This rule applies only within the DIFC, not automatically across the entire UAE.
  

Market reaction:

• XMR surged roughly 16% amid speculation of demand shifting elsewhere.
  
• ZEC dipped slightly but held key support levels.
  Now? ZEC seems to be recovering healthily at $427 as at January the 15th. 

This move builds on earlier DIFC consultations from October 2025 and signals Dubai’s push toward a more institution-friendly crypto environment.

VARA’s Position on Privacy Coins (Dubai Mainland)

Dubai’s Virtual Assets Regulatory Authority (VARA) — which oversees crypto activity outside the DIFC — had already banned privacy coins since 2023.

Under VARA rules:

• Issuing, trading, or promoting privacy coins is prohibited
  
• Only licensed virtual asset service providers (VASPs) may operate
  
• Marketing is restricted to compliant entities
  

There have been no major changes in 2025–2026, but VARA’s stance aligns closely with the DFSA’s updated framework.

UAE Federal Context: Federal Decree-Law No. 6 of 2025

At the national level, the UAE enacted Federal Decree-Law No. 6 of 2025 on September 16, 2025, significantly reshaping financial and virtual asset regulation under the Central Bank of the UAE (CBUAE).

While not solely focused on privacy coins, it reinforces existing restrictions:

Key Provisions

• Privacy Token Restrictions:
  
  The law bans the issuance, servicing, promotion, or use of privacy tokens (and algorithmic stablecoins) as means of payment in or into the UAE.
  
• Licensing & DeFi Impact:
  
  Licensing is required for trading platforms, custody services, payment systems, and even DeFi protocols if they serve UAE users.
  
  The “just code” defense no longer applies — decentralized projects must comply if they target the UAE.
  
• Transition Period & Penalties:
  
  Entities have until September 2026 to become licensed, partner with licensed firms, or geo-block UAE users.
  
  Non-compliance can lead to:
  
  • Fines up to AED 1 billion
    
  • Criminal penalties, including imprisonment and fines up to AED 500 million
    

This creates a layered regulatory system involving federal authorities, DFSA, and VARA.

Overall Takeaway & Market Implications

Dubai is balancing crypto innovation with strict compliance to attract institutional capital. While areas like tokenization and fiat-backed stablecoins are encouraged, privacy coins are increasingly treated as high-risk.

What This Means:

Pros

• Clearer regulatory framework for compliant crypto assets
  
• Increased confidence for institutions and licensed firms
  

Cons

• Fewer options for privacy-focused users
  
• Possible migration to offshore platforms or unregulated DEXs
  

Looking Ahead

• Enforcement is expected to tighten further in 2026
  
• Tolerance for unlicensed or high-risk crypto activity will continue to shrink
  

If you operate in Dubai or hold privacy coins, it’s wise to consult local legal experts, as rules continue to evolve rapidly. Note that broader data laws like the UAE’s Personal Data Protection Law (PDPL) exist, but they are separate from crypto-asset regulation.

While Sir Mert did specify that the rules didn’t hold the same for individuals, it would be best to seek expert guidance before making a decision to understand what’s best for you. 

He also shared a result about the SEC finishing an investigation into ZEC foundation just recently as well, with hopes for positive outlooks and sentiment to return. 

What about you? What do you think will be the outcome of the recent upheaval surrounding Zcash? Another run? Will we see and surpass $700 again? Time will tell. 

In other news, ICM.Run has a surprise for you. 

You could check their website for a headstart if you want to and I will be doing another article for that but only after an official announcement has gone out. Until then if you’d been holding some ICM, then your portfolio probably saw an eye pleasing surge just yesterday. 

I’ll be here when that happens but until then, I remain your pen pal who has stories and updates to share. Stay on top of your game, Cypher.