The Dubai Financial Services Authority (DFSA) and the Virtual Assets Regulatory Authority (VARA) have finalized a comprehensive regulatory environment that leaves no room for anonymity-enhanced digital assets. As of Jan. 12, 2026, new rules have reinforced the categorical ban on privacy coins across all of Dubai, including the Dubai International Financial Centre (DIFC).

Regulators in Dubai define privacy tokens or anonymity-enhanced cryptocurrencies, as assets that prevent the tracking of ownership or transaction flows. Under the latest updates, core privacy coins like Monero ( XMR) and Zcash (ZEC) are strictly prohibited. This ban extends to the use of anonymizing tools such as mixers or tumblers, including Tornado Cash, which are explicitly barred from use by regulated firms.

Additionally, algorithmic tokens are subject to intense scrutiny and are often excluded due to concerns regarding transparency and their potential for market manipulation.

While Dubai’s regulatory landscape is divided between onshore zones and the DIFC, both primary regulators have converged on a unified stance against privacy-centric assets. VARA, which oversees onshore Dubai and its free zones, has maintained an explicit ban since 2023. This prohibits the issuance, listing and facilitation of transactions for any anonymity-enhanced cryptocurrencies. Violations under VARA’s jurisdiction can trigger fines reaching tens of millions of dollars, alongside the potential revocation of commercial licenses.

Dubai’s decisive move to prohibit these tokens comes amid a significant global resurgence in privacy-focused assets. Throughout 2025, a powerful market narrative emerged as investors sought refuge from increasing blockchain surveillance and “forensic-heavy” regulatory environments. This shift turned privacy coins from a niche category into one of the year’s most resilient outliers.

In 2025, ZEC and XMR emerged as top-tier digital assets, with the former seeing gains of roughly 700% following a rapid influx of shielded token adoption and whale accumulation. Monero similarly defied broader market trends, hardening its technical layers and closing the year with gains exceeding 100%.

Read more: Privacy Is Back: Why XMR and ZEC Won the 2025 Crypto ‘Wild Ride’

The start of 2026 has so far signaled that this momentum is not a fleeting trend. Both assets continue to show technical strength. Despite this, the DFSA’s prohibition of privacy coins is being implemented in order to meet three core goals. First, it ensures traceability by requiring that every transaction be linked to a verified identity to combat money laundering and terrorism financing. Second, it enhances investor protection by banning opaque assets that are highly susceptible to market manipulation. Finally, it maintains global alignment, ensuring the UAE remains compliant with the international standards set by the Financial Action Task Force (FATF).

Under the 2026 rules, firms can no longer rely on a safe list provided by the regulator and must instead conduct their own documented assessments under GEN Rule 3A.2.1. This requires mandatory due diligence to ensure a token does not possess anonymity-enhancing features. Any firm found to be supporting privacy-focused assets faces immediate enforcement action, as these tokens inherently fail to meet the technology and governance standards required by Dubai’s financial authorities.

• Are privacy coins like Monero and Zcash legal to trade in Dubai? As of Jan. 12, 2026, the DFSA and VARA have categorically prohibited the issuance, listing, and trading of all anonymity-enhanced cryptocurrencies within the DIFC and onshore Dubai.
• What are the penalties for virtual asset firms using mixers or tumblers? Regulated firms using anonymizing tools like Tornado Cash face immediate enforcement, which may include license revocation and fines reaching tens of millions of dirhams.
• How does the new DFSA Crypto Token regime affect firm accountability in 2026? Under GEN Rule 3A.2.1, licensed firms are now directly responsible for documenting and proving the suitability of every token they offer, as the regulator no longer maintains a “safe list.”
• Why did Dubai implement a total ban on privacy-focused digital assets? The prohibition ensures the UAE remains compliant with FATF global standards by mandating transaction traceability to combat money laundering and terrorism financing.

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