EU Moves to Centralize Crypto Regulation, as UAE Revamps Crypto Regulations

The European Commission advanced a proposal to grant the European Securities and Markets Authority (ESMA) expanded direct supervisory powers over cryptocurrency businesses across the EU.

This initiative builds on the Markets in Crypto-Assets Regulation (MiCA), which fully entered into force on December 30, 2024, but currently relies on a fragmented system where crypto firms obtain authorization in one member state and operate bloc-wide under national oversight.

This includes final decision-making in cross-border disputes and enhanced monitoring of global operations by EU-licensed firms. Proponents, including regulators in France, Austria, and Italy, cite risks to investor protection, market stability, and anti-money laundering (AML) compliance from inconsistent national rules.

Centralization could foster stability and growth but at the cost of short-term disruptions. By standardizing rules, ESMA oversight may attract institutional investors through enhanced transparency and reduced cross-border risks, potentially boosting trading volumes—already up 70% quarter-over-quarter in Q1 2025 under MiCA.

However, it risks market consolidation, where smaller firms struggle with heightened compliance, leading to mergers or exits and a less diverse ecosystem. The Bybit incident highlighted how international exposures could threaten the EU market.

The draft targets larger exchanges first, with potential delegation back to national authorities for smaller firms. It’s part of a broader “market integration package” to complete the EU’s Capital Markets Union.

Approval from the European Parliament and Council is pending, with a formal proposal expected in December 2025. National regulators supervise firms licensed in their country, with passporting rights for bloc-wide operations.

ESMA takes direct control for major players, reducing reliance on 27 national bodies. Licensing for CASPs effective Jan 2025, stablecoin rules, whitepaper registries. Enhanced AML via upcoming Anti-Money Laundering Authority launching 2026; stress testing and global risk monitoring.

Transitional Measures

Grandfathering until July 2026 for some jurisdictions; DORA applies Jan 2025. New compliance layers for firms, potentially disrupting existing setups. Supporters argue it fosters a “single market” for crypto, boosting innovation and investor confidence—aligning with MiCA’s goals of consumer protection and financial stability.

Critics, including some industry voices, warn of “bureaucratic overreach” that could stifle startups, prolong approvals, and drive firms to less regulated jurisdictions. German officials and fintech advocates see it as a step toward economic sovereignty, potentially integrating crypto with initiatives like the digital euro.

French regulators pushed the idea post-Bybit, but others fear it replaces decentralized crypto ideals with Brussels-centric control. Market chatters called it “centralization & control nothing else,” echoing fears of reduced autonomy.

If approved, this could position the EU as a global crypto standard-setter, contrasting with U.S. divergences under a pro-crypto Trump administration. However, it risks short-term market disruption for the EU’s €6.9 billion crypto sector (projected to hit €27.6 billion by 2033).

Firms should prepare for stricter reporting, with ESMA’s interim registers already tracking compliant entities. This move underscores the EU’s balancing act: harnessing crypto’s growth while mitigating risks like those from non-EU mining or hacks.

UAE’s New Crypto Regulations: No Bitcoin Ban, But Significant Restrictions on Tools Like Wallets

The United Arab Emirates (UAE) has introduced stricter cryptocurrency regulations through Federal Decree-Law No. 6 of 2025, which updates the country’s banking framework and expands the Central Bank’s oversight.

Published in the Official Gazette and effective since September 16, 2025, this law does not outright ban Bitcoin or cryptocurrencies. Residents can still legally buy, hold, trade, and own Bitcoin through licensed platforms.

However, it imposes heavy licensing requirements on entities offering crypto-related “tools” and services, sparking widespread fears of a de facto ban on self-custodial wallets and similar infrastructure.

This has led to global panic in the crypto community, with some developers and firms considering pulling services from the UAE to avoid liability. The regulation targets “facilitation” of financial activities, broadening the scope to include technology providers.

Any entity (local or foreign) offering tools that “engage in, offer, issue, or facilitate” financial activities must obtain a Central Bank license. This includes APIs, blockchain explorers, analytics platforms (e.g., CoinMarketCap), and self-custodial wallets.

Global apps accessible to UAE residents could face fines up to AED 500 million ~$136 million or jail time if unlicensed. Developers like Mikko Ohtamaa warn this makes offering Bitcoin wallets a “crime” without approval.

Article 61 criminalizes unlicensed advertising, emails, or online posts about crypto services. Even social media promotions or DeFi-related content could trigger enforcement, affecting influencers and exchanges.

Scope and Extraterritorial Reach; Applies nationwide, overriding free-zone rules (e.g., Dubai’s crypto hubs like DMCC). Foreign firms are liable if services reach UAE users. Could lead to app stores (Google/Apple) geo-blocking wallets in the UAE, limiting self-custody options.

Imprisonment and fines from AED 50,000 to AED 500 million for violations (Article 170). Harsh deterrents; compliance costs may drive smaller providers out. One-year transition from September 16, 2025 potentially extendable, for firms to license up.

Additional clarifying rules expected soon, but uncertainty persists. This aligns with international pressures from bodies like the Financial Action Task Force (FATF) to combat money laundering, but critics argue it stifles innovation in a country previously hailed as a crypto haven.

Developer Mikko Ohtamaa called it a “Bitcoin ban” on X, highlighting how it effectively kills self-custody by requiring KYC/AML for wallets. Aave founder Stani Kulechov echoed concerns about Dubai’s “crypto paradise” ending.

Legal firm Gibson Dunn described the scope as “unusually broad,” risking a global tech crackdown. UAE authorities and analysts have stressed no ban on holding or trading Bitcoin—only unlicensed provision of tools. Community members on X dismissed exaggerated claims, noting licensed exchanges like Binance remain operational.

One user quipped: “No wallet. No Bitcoin. No problem”—but this was labeled misleading bait. This follows earlier 2024 rules on stablecoins effective June 2025, restricting non-dirham tokens for payments but allowing them for trading/investment.

Ironically, just weeks ago, UAE telecom giant du launched regulated Bitcoin cloud mining for residents, signaling ongoing pro-crypto moves. While not a full ban, the law could erode the UAE’s appeal as a crypto hub by complicating access to decentralized tools.

High-net-worth investors might pivot to licensed custodians, but everyday users risk reduced options for privacy-focused self-custody. Watch for Central Bank clarifications in the coming months—these could ease fears or confirm the crackdown.

For now, UAE-based crypto enthusiasts should stick to licensed platforms to stay compliant. If you’re in the UAE, consult local legal experts before using unregulated wallets.