A New Era of Financial Governance in the UAE: Key Reforms Under Federal Decree-Law No. (6) of 2025

The promulgation of Federal Decree-Law No. (6) of 2025 marks a transformative milestone in the United Arab Emirates’ legal and financial architecture. Issued by President Sheikh Mohamed bin Zayed Al Nahyan, the legislation consolidates and modernises the regulatory regimes governing the Central Bank, financial institutions, and the insurance sector.

By repealing earlier legislative cornerstones -- most notably Decretal Federal Law No. (14) of 2018 and Federal Decree-Law No. (48) of 2023 -- the new law establishes a unified and forward-looking framework for financial supervision, conduct, and systemic stability across the State.

Strengthening the Autonomy of the Central Bank

At the core of the Decree-Law is the reinforced independence of the Central Bank of the United Arab Emirates (CBUAE). The Central Bank is expressly defined as a federal public institution with its own legal personality, enjoying full financial and administrative independence. Importantly, it reports directly to the President of the State, insulating its decision-making from interference by other administrative authorities.

The CBUAE’s statutory objectives are expanded to include safeguarding monetary stability, protecting the integrity of the financial system, and promoting sustainable finance through the integration of environmental, social, and governance (ESG) principles. To underpin these responsibilities, the law fixes the Central Bank’s paid-up capital at Dh20 billion.

The Digital Frontier: Digital Dirham and Virtual Assets

The Decree-Law formally introduces the Digital Dirham, redefining the national currency to encompass banknotes, coins, and digital forms, all of which constitute legal tender at full face value. The Central Bank retains the exclusive authority to issue the Digital Dirham and to determine its technical and operational specifications.

While virtual assets are expressly distinguished from the official currency, their financial use is brought firmly within the regulatory perimeter. Any person or entity providing payment services using virtual assets, or operating platforms -- including decentralised applications (dApps) and protocols -- that enable financial services, must now obtain a licence. This approach ensures that innovation is subject to the same prudential oversight as conventional banking activity.

Unified Oversight of Insurance and Islamic Finance

A major structural shift under the Decree-Law is the full integration of the insurance and reinsurance sector into the Central Bank’s supervisory remit. Insurers are now subject to technical reserve requirements and solvency margins determined by the CBUAE. As a general rule, the law prohibits the combination of Insurance of Persons (life insurance) and Property and Liability Insurance within the same entity unless complete separation is maintained across technical, financial, and administrative systems.

The law also establishes the Emirates Insurance Federation as a professional association representing all licensed insurers in the State.

For Islamic Financial Institutions, the Decree-Law entrenches the authority of the Higher Shari’ah Authority, which is tasked with issuing binding rules, standards, and principles governing Shari’ah-compliant activities. Its resolutions and fatwas are mandatory for all internal Shari’ah supervision committees. Each Islamic Financial Institution must appoint an independent internal committee to ensure that its products, services, and contracts remain compliant.

Consumer Protection, Fraud Prevention, and Financial Inclusion

Consumer rights receive heightened protection under the new regime. An independent complaints resolution unit, endowed with its own legal personality, will be established to adjudicate disputes involving banks and insurance companies. Decisions relating to claims exceeding Dh100,000 may be appealed before the Court of Appeal, while rulings on smaller claims are final and directly enforceable.

In response to evolving financial crime risks, licensed institutions are now required to implement robust mechanisms to prevent fraud, including social engineering attacks, identity theft, and unauthorised transactions. The Decree-Law also explicitly promotes financial inclusion, recognising the right of every person to access appropriate banking and financial products.

Early Intervention and Resolution Powers

To mitigate systemic risk, the CBUAE is designated as the Resolution Authority, with extensive powers of early intervention. Where a licensed institution shows signs of financial distress, the Central Bank may require capital injections, mandate changes to business strategy, or compel a merger with another institution.

During resolution proceedings, the CBUAE may remove senior management, suspend shareholder rights, and transfer assets or liabilities to a bridge institution to preserve critical financial functions. These powers prevail over general insolvency and bankruptcy laws, underscoring the primacy of financial stability.

Compliance Obligations and Penalties

The penalties for non-compliance are notably stringent. Conducting regulated financial activities without a licence may result in imprisonment and fines of up to Dh500 million. Licensed institutions face administrative penalties of up to Dh1 billion for serious violations. The law also criminalises the intentional public mutilation or destruction of the national currency, attracting custodial and financial sanctions.

Conclusion

Federal Decree-Law No. (6) of 2025 represents a decisive leap forward in the UAE’s financial governance framework. For legal professionals and financial practitioners, it necessitates a comprehensive reassessment of compliance structures -- particularly in relation to digital assets, Shari’ah governance, and insurance operations.

By centralising oversight and significantly enhancing the powers of the Central Bank, the UAE has constructed a resilient regulatory architecture capable of addressing the demands of an increasingly complex global financial system. All entities subject to the Decree-Law are required to regularise their position within one year of its entry into force.

 

 

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