Outside Source
Bad advice from unqualified consultants can lead to costly regulatory mistakes.
Opinion
Opinion by: Irina Heaver, Bitcoin and crypto lawyer
The United Arab Emirates has positioned itself as a global capital of crypto innovation. With zero personal income tax, low corporate taxes and some of the clearest regulatory frameworks in the world, entrepreneurs are flocking to Dubai, Abu Dhabi, Ras Al Khaimah and beyond to set up their businesses. The glittering skyline and a government that actively encourages entrepreneurship and innovation create a tempting launchpad for ambitious crypto projects.
Yet beneath the surface of success stories and thriving startups lies an uncomfortable truth: Many founders are setting up their businesses incorrectly, and the root cause is almost always the same — bad advice from unqualified consultants.
When “experts” aren’t experts
In the UAE, company formation is often seen as a straightforward process. Consultants and corporate service providers promise founders a smooth setup with glossy brochures and persuasive sales pitches. Here’s the kicker: Opening a company differs from the correct regulatory structuring.
Time and time again, founders invest significant capital and time into their dream ventures, only to realize months later that their activities require specific regulatory approvals that were never obtained. They relied on advice from people who weren’t equipped to advise on the nuances of the UAE’s regulatory framework for virtual assets and financial services.
One particularly egregious case involved a founder whose consultant assured that a generic free zone license was sufficient to operate a crypto exchange.
Another case involving forming a development company was part of the decentralized exchange legal structure. It was incorporated as a Proprietary Crypto Trading Company, and filings with a local regulator for proprietary trading were done. It took months and tens of thousands of government fees to amend the company structure.
In another case, a founder was advised to register their token issuance company in a free zone entirely unsuited for such activities. A legal opinion could not be issued, and the token could not be listed on exchanges. The founder also incurred over half a million dollars in tax liability.
The fiasco could have been avoided with a 20-minute consultation call with a competent legal professional providing the correct regulatory advice.
Why the UAE’s regulatory landscape requires expertise
The UAE isn’t a one-size-fits-all jurisdiction. Its regulatory framework is layered and nuanced, with federal laws, emirate-level laws and free-zone regulations all operating simultaneously. The UAE has five virtual asset regulators, including the Securities and Commodities Authority (SCA), the UAE Central Bank and Dubai Virtual Assets Regulatory Authority (VARA).
Recent: 37% of UAE retail investors plan to increase crypto in 2025
Additionally, there are two financial free zones, Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC), operating under English common law, each with their regulators: the Financial Services Regulatory Authority (FSRA) and the Dubai Financial Services Authority (DFSA), respectively.
On top of this, the UAE is home to over 45 economic free zones and two offshore zones, each with unique rules and regulatory frameworks. Free zones are often misrepresented as quick-fix solutions for company formation. Still, each zone caters to specific business activities, and mismatched licensing can result in various compliance issues, the most common being the inability to open a bank account and the most costly — enforcement action from a regulator.
Each regulatory body has distinct requirements, fees and timelines. Yet too many consultants treat company formation in the UAE like baking cookies: following a template and assuming it works for every business.
Crypto businesses are not bakeries. The consultants setting up cupcake shops are not qualified to guide a Web3 startup through the labyrinth of licensing and compliance. They might know their dough, but they don’t know about a DAO.
The real costs of bad advice
When a founder receives poor advice, the consequences aren’t limited to administrative headaches — they can cause irreparable harm to the business. Poor advice leads to financial losses. Correcting regulatory missteps is expensive. Penalties, fines and forced business restructuring can, and will, drain financial resources. Word spreads fast in a tightly connected global crypto ecosystem. Regulatory violations in one jurisdiction can make other regulators wary of your project. Many founders find their operations frozen for months while they scramble to fix compliance issues. For startups, where agility and momentum are critical, these delays can be the difference between success and failure.
The rise of DIY founders
To save costs, some founders take matters into their own hands. Armed with Google searches, ChatGPT and outdated PDFs, they attempt to navigate incorporation and regulatory approvals themselves. UAE regulations evolve rapidly, and what was accurate six months ago might already be obsolete. Moreover, regulators in the UAE expect clear, well-prepared documentation. Ambiguity or poorly drafted policies not only lead to delays but can also trigger heightened scrutiny from authorities.
Get it right from day one
What’s the solution? It starts with the understanding that not all advisers are created equal.
Work with specialists, not generalists. If an adviser claims to handle everything from restaurants to crypto exchanges, that’s a red flag. Don’t trust, verify. Look for well-established legal professionals and consultants specializing in crypto and virtual asset regulations. A regulatory strategy cannot be an afterthought. Determining licensing needs must be done before incorporation is even considered.
The UAE is the place to be
Cutting corners in the UAE’s regulatory maze is like trying to skydive with a discount parachute — it might seem fine at first, but the landing will be brutal and expensive. Despite the challenges, the UAE remains one of the most attractive jurisdictions for crypto entrepreneurs. The regulatory clarity (when navigated correctly), access to investment and supportive government policies create an environment where ambitious projects can genuinely thrive. Success isn’t guaranteed. It requires careful planning, understanding the regulatory landscape and, most importantly, proper guidance from day one.
Don’t treat legal and regulatory strategies as an afterthought. Treat them as the foundation of success. Getting it right from the start is so much easier. Restructuring does take months and tens of thousands of dollars. Build smart, build strong, and remember that shortcuts are the most expensive route in crypto and compliance.
Opinion by: Irina Heaver, Bitcoin and crypto lawyer.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article first appeared at Cointelegraph.com News
