How the New UAE Central Bank Law Affects Businesses in the UAE?
The issuance of the Federal Decree Law No. 6 of 2025 has been one of the most significant fiscal measures implemented in the UAE in 2025. The law aims to regulate the activities of the Central Bank, Financial Institutions and Insurance Businesses in the UAE. It sets a milestone for aligning the UAE’s financial eco-system with international standards[1].
The law introduces crucial reforms in the conduct of major financial activities and sectors. As a result, many businesses may be affected without even realising. Therefore, it is important to understand the impact of this law on the business sector.
Whether you are a bank, fintech, payment service provider, exchange house, or an ordinary business in the UAE, read on to understand how the new regulatory framework impacts you.
A. Expansion in scope of financial activities requiring a license:
Article 60 of the new law puts a prohibition on carrying on or promoting financial activities without a license. The scope of these activities is listed under Article 61. Among other things listed under Article 61, two new categories of financial activities requiring a license have been added. This includes:
- Providing open finance services; and
- Providing payment services using virtual assets[2].
These new additions can significantly impact emerging fintech or SMEs offering digital financial platforms. Therefore, businesses dealing with such activities need to be more vigil towards the new compliance and license requirements in the UAE.
B. Power to impose macroprudential measures:
The Federal Law Decree No. 6 of 2025 empowers the Central Bank to impose macroprudential controls to tighten or regulate lending standards in the UAE. This means possibility of high scrutiny in major sectors such as real estate and high-risk SME lending. However, it is an important measure to prevent economic crisis and maintain stability.
C. Ban on compound interest & Mandatory credit guarantees:
Article 148(11) has introduced a ban on compound interest in respect of loans obtained from banks. This measure is intended for the benefit of the borrowers. This will help in preventing situations where debt accrues extensively because of compounding of interest over time[3].
At the same time, to prevent the borrowers from misusing this provision; the new law has introduced the requirement of providing adequate guarantees for sole proprietors.
Banks are now required to obtain appropriate security, such as collateral or third-party guarantees to preserve their right to recover loans through court proceedings. This balanced approach safeguards borrower interests while ensuring that banks are not exposed to undue credit risk.
D. Enhanced fraud protection and data-sharing protocols:
The new law has marked a departure from the earlier laws to prevent fraud and protect consumers. Article 149 of the law empowers licensed financial entities to share customer data without consent for fraud verification[4]. This measure was restricted under the earlier law. Although this measure protects businesses from facing sector-wide fraud complaints, at the same time it also imposes increased reporting burdens. This adds to the compliance overhead of businesses.
E. Introduction of independent consumer dispute resolution unit:
Article 148(2) of the Decree introduces a dedicated Central Bank of the UAE (CBUAE) dispute resolution unit for addressing business, financial, and consumer disputes. This unit comprises specialised committees consisting of judges and subject-matter experts, empowered to issue binding decisions in disputes involving banks and insurance companies, with a monetary threshold of up to AED 100,000. There is no provision of appeal for banks or insurance companies. This provides a faster process of dispute resolution as compared to the fragmented grievance processes under the old law[5].
F. Enhanced penalties for violations:
The new central bank law has not only introduced strict procedures and measures but also enhanced the extent of penalties to secure implementation. Fines have been escalated up to AED 1 billion for institutions and 5 million for individuals. Additionally, a new penal measure of public naming of violators on the CBUAE’s website has been introduced. This will help in deterring the practice of shadow banking. Therefore, compliance with the new requirements is essential to avoid hefty fines and blacklisting.
G. Recognition of digital currency:
The old law did not deal with digital currency or decentralised payment models. It merely recognised Dirham as the only legal tender in the UAE. However, the new law has authorised the central bank to regulate digital money, central bank digital currency and virtual asset payment services. This is a step towards digital transformation of the economic activities in the UAE; bringing them at par with international practices.
H. CBUAE’s early intervention and resolution tools:
The central bank also has power to implement preventive measures to prevent financial institutions from collapsing or becoming insolvent. This is because the impact of such events can cause disruptions in the wider market. The central bank is empowered to step-in for early intervention with help of resolution tools, such as bail-ins or creation of bridge institutions.
A bridge institution is a temporary entity created to prevent the disruption of essential financial services; whereas bail-ins refer to the internal absorption of losses by shareholders instead of relying on public funds.
Therefore, the provisions of Federal Decree-Law No 6 of 2025 bring both regulatory clarity and stricter compliance obligations for UAE businesses. To understand how these changes affect your operations and to remain compliant, consider seeking professional legal advice. Khalifa Bin Huwaidan Advocates and Legal Consultants can assist you in navigating the new regulatory framework efficiently and confidently.
[1] Federal Decree-Law No 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business (UAE) https://uaelegislation.gov.ae/en/legislations/3284
[2] Article 61, Federal Decree-Law No 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business (UAE)
[3] Article 148, Federal Decree-Law No 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business (UAE)
[4] Article 149, Federal Decree-Law No 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business (UAE)
[5] UAE President Issues Federal Decree Law on Central Bank Regulation of Financial Institutions and Insurance Activities (UAE Government Legislation Portal) https://uaelegislation.gov.ae/en/news/uae-president-issues-federal-decree-law-on-central-bank-regulation-of-financial-institutions-insurance-activities
FAQs
Yes, the Federal Decree Law No. 6 of 2025 has introduced several provisions such as guarantee requirements, tighter risk assessment which can impose strict requirements for financial institutions and businesses. While such new measures may enhance the compliance overhead, but at the same time they are necessary for promoting a healthy lending environment.
The new central bank does not govern free zone entities, subject to certain exceptions, such as mainland businesses or foreign entities targeting UAE customers. This is because free zone entities are subject to their own regulatory regimes.
No, under the new law, if a bank fails to obtain adequate guarantees from a sole proprietor, its ability to recover the loan through court proceedings may be restricted, reinforcing responsible lending practices.
