Over the last few years technological innovations have introduced everyone to a whole new world of digital economy. While most jurisdictions globally have been contemplative, the United Arab Emirates has been one of the few jurisdictions, which has been extremely supportive of technological innovations. Recently the UAE Government announced the UAE Blockchain Strategy 2021 which aims at capitalizing on blockchain technology to transform 50% of government transactions into the blockchain platform by 2021.

In the same stride, three regulators in UAE have introduced their versions of regulatory sandboxes. A regulatory sandbox, is a framework set up by a regulator that allows startups and other innovators to conduct live experiments in a controlled environment under a regulator's supervision.

Emirates Securities and Commodities Authority (SCA)

The SCA issued a decision approving the fintech regulatory framework as well as regulations governing the testing environment last week.

In accordance with the framework, a FinTech regulatory sandbox is understood to be a process-based framework that allows entities to test innovative products, services, solutions and business model under a relaxed regulatory environment, but within a defined space and duration. SCA proposes to work together with the applicant to evaluate innovative products, services, solutions or business models to identify multiple legal and regulatory requirements, which can potentially be relaxed or waived throughout the duration when the participant is in the sandbox. As per the framework the applicants are required to meet the following criteria:

The product, services, solution, or business model must

  1. be related to financial products and/or services that fall within SCA’s regulatory regime
  2. be innovative, in terms of technology
  3. demonstrate benefit for consumers and/or industry (such as promote growth, improve efficiency, mitigate risk and provide more options)
  4. exhibit a genuine need for testing within the sandbox framework.


Dubai International Financial Centre (DIFC)

The Dubai Financial Services Authority (DFSA), the regulatory arm of DIFC, the international financial center in Dubai, announced in May this year, that it will allow financial technology firms to apply for an Innovation Testing License (ITL).

The applicant in order to apply for the ITL will have to satisfy the following conditions:

  1. it involves innovation and the use of financial technology
  2. it involves an activity that, if carried out within the DIFC, would amount to a financial service
  3. it will be ready (or soon be ready) to start live testing with customers or industry (testing phase)
  4. the applicant firm must intend to roll out its business on a broader scale in or from the DIFC after it has successfully completed the testing phase.


Abu Dhabi Global Market (ADGM)

ADGM the international financial center in Abu Dhabi, announced an initiative to launch a FinTech digital sandbox an year ago. ADGM has introduced ‘Reglab’ as a tailored regulatory regime for FinTech participants. The RegLab allows the participants to develop and test its FinTech proposition in a safe environment while not putting undue regulatory burden on the participant.

In accordance with the RegLab framework, Participants that qualify for authorisation under the RegLab framework will be granted the Financial Services Regulatory Authority’s Financial Services Permission.

The legislative requirements applicable to FinTech Participants under the RegLab framework will be tailored according to the specific characteristics and risks associated with each proposal.



While any jurisdiction takes a considerable amount of time to adopt and implement new technology, a mere willingness to try and accept something ‘innovative’ is usually one of the major stepping stones.

We at Karm are lucky to be witnessing this revolution in UAE, and would be happy to help you in getting your ticket on this spaceship!



About Karm

Karm is a legal consultancy firm based in UAE, with a strong track-record of providing legal services to its clientele in the fintech, corporate/commercial and start-up laws. Team Karm is currently assisting multiple clients with procuring sandbox approvals and liasoning with the regulators for various blockchain, medtech, insuretech and fintech projects.


DISCLAIMER: This newsletter is for general guidance and is not intended to be a substitute for specific legal advice. Advice should be sought about specific circumstances. If you would like further information please contact:

Kokila Alagh (Founder); Soumya George (Principal Associate); Akshata Namjoshi (Senior Associate).

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