The New Banking Law in UAE: Understanding Federal Decree-Law No. 6 of 2025 and Its Impact on Financial Regulation

The New Banking Law in UAE: Federal Decree-Law No. 6 of 2025 Ushers In a New Era of Financial Regulation

Estimated reading time: 16 minutes

Key Takeaways

• Consolidation under Federal Decree-Law No. 6 of 2025 modernizes and unifies the UAE’s banking and insurance statutes.
• Empowered CBUAE gains early‐intervention rights, expanded digital oversight, and comprehensive supervisory authority.
• Mandated consumer protection and financial inclusion with unified dispute resolution across the sector.
• Innovation embrace through licensing of fintech, technology providers, and legal recognition of the Digital Dirham.
• Robust enforcement featuring fines up to AED 1 billion and pre-judgment penalty deductions.

Introduction: Unveiling the New Banking Law in UAE

In an era defined by rapid technological change and robust economic growth, regulatory frameworks must evolve or risk obsolescence. The recent enactment of the Federal Decree-Law No. 6 of 2025, widely dubbed the “New Banking Law in UAE,” Issued on 8 Sep 2025, published in the Official Gazette on 15 Sep 2025, and effective 16 Sep 2025. Articles 185 and 186 repeal the 2018 Central Bank Law and the 2023 Insurance Law, this landmark statute consolidates prior banking and insurance legislation into a single, forward-looking code—reasserting the UAE’s leadership in financial regulation and consumer protection.

This analysis delves into the law’s genesis, its transformative provisions, and the far-reaching implications for banks, insurers, technology providers, and consumers in the UAE’s burgeoning digital economy.

Why a New Banking Law? Context and Motivation

Prior to 2025, the UAE’s banking sector was regulated under the 2018 Central Bank Law and the 2023 Insurance Law. However, the surge in fintech, digital currencies, and complex financial instruments exposed gaps in this bifurcated regime. Policymakers recognized the need for a unified, resilient framework to address emerging risks and ensure stability.

Issued on 8 September and gazetted a week later, the new law empowers the Central Bank of the UAE (CBUAE) with enhanced oversight, consumer safeguards, and swift enforcement capabilities.

Key Provisions of the New Banking Law in UAE

1. Bolstering the Central Bank’s Authority: Ensuring Financial Stability

The law grants the CBUAE unprecedented autonomy and early-intervention rights in distressed institutions, strengthening the country’s financial safety net. Supervision now expressly covers payment systems (retail & wholesale), open finance, payment services using virtual assets, and technology providers that facilitate financial services (Art. 62), while virtual assets are not ‘currency’ under the statute (Art. 187(2)).

2. Consumer Protection and Financial Inclusion: Raising the Bar

All licensed entities must now offer accessible services and operate under a unified complaint and dispute resolution mechanism—covering banks and insurers alike. This elevates transparency and speed in handling consumer grievances. Consumer protection and inclusion are strengthened, with unified complaints handling for banking and insurance under the CBUAE’s remit (to be detailed in implementing frameworks) and a judge-chaired, independent Grievances & Appeals Committee for appeals against CBUAE decisions (Art. 167).

3. Regulatory Modernization: Embracing Innovation and Digital Transformation

The definition of licensed financial activities is broadened to include open finance, virtual-asset payments, and other fintech services. The law also introduces licensing for technology providers—cloud platforms, APIs, and RegTech—balancing innovation with risk management.

4. Penalties and Enforcement: A New Era of Compliance

AED 1 billion becomes the maximum administrative fine, with provisions for automatic deduction before judicial rulings. Minimum penalties for unlicensed activities further underscore the regime’s seriousness. In fact administrative sanctions now include AED 1 billion max, with immediate enforceability and automatic debit. For unlicensed activity, the statute prescribes minimum administrative fines of at least AED 1 million and separate criminal ranges (up to AED 500 million plus imprisonment) depending on conduct.

5. Legal Recognition of the Digital Dirham: Solidifying UAE’s CBDC Leadership

The law explicitly recognizes the Digital Dirham as a legal payment instrument, clearing the path for CBDC integration, seamless settlements, and consumer trust. In fact Digital Dirham is legal tender under Art. 54(1); issuance/transfer mechanics under Art. 58; and all legislative references to ‘dirham/currency/cash’ include digital form (Art. 187(1)).

Transitional Arrangements for Businesses and Institutions

Entities have a one-year compliance window from the law’s effective date, extendable at the CBUAE’s discretion. During this period, prior regulations remain in force to avoid legal vacuums. In fact Art. 183 preserves existing CBUAE regulations until replaced; Art. 184 grants one (1) year from 16 Sep 2025 to reconcile positions (extendable by Board). Full guidance is provided in company formation guide.

The Far-Reaching Impact of the New Banking Law

Future-Proofing the UAE Financial Ecosystem

Empowering the CBUAE with early ­intervention rights and digital oversight substantially mitigates systemic risk, ensuring resilience against technological and market shifts.

Consumer Confidence and Protection: No Longer Optional

Unified dispute resolution and mandated fairness elevate trust, driving uptake of financial services across underserved populations.

Digital Transformation: Not Just Talk, But Binding Law

With open finance, virtual-asset payments, and the Digital Dirham enshrined in law, the UAE sets a global benchmark for national digital finance strategies. See commercial companies law 2025.

Strengthened Compliance Culture

Heightened penalties and swift enforcement drive a shift from checkbox compliance to integrated, mission-critical risk management.

Practical Implications: What Should Financial Institutions and Consumers Expect?

For Financial Institutions and FinTechs

Review and update licensing, reassess partnerships, integrate new consumer-protection protocols, and prepare for CBDC interactions to capitalize on regulatory clarity.

For Consumers and Businesses

Anticipate broader access to products, faster dispute resolution, and seamless engagement with digital-currency services.

Conclusion: A Quantum Leap for the UAE Financial Legal Framework

Federal Decree-Law No. 6 of 2025 is a declaration of the UAE’s commitment to regulatory excellence, consumer empowerment, and technological innovation. Stakeholders who adapt proactively will lead in this new era of financial regulation and digital advancement.

Frequently Asked Questions

What is Federal Decree-Law No. 6 of 2025?

It is the comprehensive statute that consolidates and modernizes UAE banking and insurance regulations, replacing the 2018 Central Bank Law and the 2023 Insurance Law.

When did the new law take effect?

The law came into force on 16 September 2025, with a one-year compliance window for all affected entities.

How will consumers benefit?

Consumers gain stronger protection, unified dispute resolution, broader access to financial services, and legal certainty around digital currencies.

What are the penalties for non-compliance?

Fines now reach up to AED 1 billion, with the Central Bank empowered to deduct penalties before final judicial rulings, and minimum fines for lesser breaches. Administrative sanctions now include AED 1 billion max, with immediate enforceability and automatic debit. For unlicensed activity, the statute prescribes minimum administrative fines of at least AED 1 million and separate criminal ranges (up to AED 500 million plus imprisonment) depending on conduct.