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Dubai’s regulator bars licensed crypto custodians from lending out or pledging client assets, even with customer consent. But a frozen balance does not prove you own what is in the account, and the rule does not guarantee you will get your money back.
Dubai’s regulatory framework is central to understanding Crypto Custody Disputes, particularly when a provider is authorised to offer custody services.
The Virtual Assets Regulatory Authority (VARA) regulates relevant virtual asset activities in Dubai outside the Dubai International Financial Centre (DIFC). The DIFC and Abu Dhabi Global Market (ADGM) operate separate financial regulatory systems under the Dubai Financial Services Authority and the Financial Services Regulatory Authority, respectively.
Identifying the correct legal entity and regulator is important because a company’s brand, group membership or general business activities do not automatically establish which rules apply to a particular customer relationship.
A review of VARA’s public register on October 27, 2026, identified six active virtual asset service providers with custody services listed among their licensed activities: Ceffu Custody, Bitpanda Custody, BitGo Custody, Zand Bank, Hex Trust and Komainu.
The figure reflects the register entries identified in that review. It is not a measure of how many custody disputes exist, nor does inclusion on the register guarantee that a customer will recover inaccessible assets. The relevant provider’s current status and permitted activities should be checked directly.
VARA’s Custody Services Rulebook provides another important point of reference. Rule III.B states that assets held in custody are not the provider’s own assets or depository liabilities. It generally requires each client’s assets to be held in separate wallets and prohibits the rehypothecation of assets held under the custody service, including with client consent.
The rulebook also contains provisions addressing designated Collateral Wallet Services, including a limited exception to the separate-wallet requirement for specified wallets. The precise service and applicable provisions therefore matter when assessing whether a particular arrangement complies with the rules.
These requirements provide a framework for examining how a custodian holds and uses client assets. Whether a provider has breached its obligations, however, depends on the applicable rules, the service agreement and the facts of the case.
For customers involved in Crypto Custody Disputes, reconstructing the movement and ownership of assets can help establish what happened and identify discrepancies between account records and blockchain activity.
A useful record should include deposits, purchases, transfers, withdrawals, rewards and charges. Customers should record the cryptocurrency involved, the quantity, the relevant blockchain network and transaction references. Account statements and original data exports should be preserved, especially if the displayed balance changes after a restriction is imposed.
Blockchain evidence can help establish that assets moved between addresses. Additional evidence may be needed to connect an address to a particular provider, demonstrate who funded a wallet or establish whether a transfer was authorised.
The distinction between technical control and legal ownership is also important. An employee or company founder may control the keys to a wallet without personally owning the assets held in it. Funding records, accounting entries, company resolutions and communications may help establish the purpose of the wallet and the authority granted to the people managing it.
Customers should preserve relevant access records but avoid sharing private keys or recovery phrases in ordinary correspondence.
When a provider restricts withdrawals, a focused written request can ask which assets are affected, why access has been restricted and what contractual or legal basis supports the decision. Customers should submit legitimate identification or compliance information through verified channels and retain copies of their communications.
A restriction may have a lawful basis, and a provider may not be able to disclose every detail of a compliance investigation. Nevertheless, the available evidence can help establish whether the restriction’s scope and duration warrant further action.
Security incidents require additional care. Customers should preserve login alerts, account messages, transaction records and any incident notice issued by the provider. Blockchain tracing may help explain the movement of funds, but identifying an address does not automatically establish the identity of the person controlling it.
Federal Decree Law No. 35 of 2022 recognises electronic evidence within the civil evidence framework. The source and integrity of electronic records remain important when presenting account data, communications or transaction information in a dispute.
The available options in Crypto Custody Disputes depend on the customer’s legal rights, the relevant agreement and the location of the provider and assets.
A claim seeking the return of identifiable cryptocurrency differs from a claim for compensation arising from an alleged breach of custody obligations. A dispute involving an unauthorised transfer may also require examination of the instructions received, the provider’s security procedures and the parties’ respective responsibilities.
Customers should review the agreement’s governing-law provisions and dispute-resolution clause, including any arbitration requirement. Where urgent measures may be necessary to preserve assets, legal advisers can assess the competent forum, supporting evidence and available remedies.
Article 247 of the federal Civil Procedure Code provides for prejudgment attachment in specified circumstances. It does not mean that every allegation involving missing cryptocurrency automatically qualifies for such an order. The relevant procedural requirements must be satisfied.
Insolvency introduces another layer of uncertainty. A withdrawal freeze does not necessarily mean that a platform has entered formal insolvency proceedings. Customers should identify the legal entity involved and check for an official notice before assuming that insolvency rules apply.
Federal Decree Law No. 51 of 2023 applies to entities within its scope, while proceedings in the DIFC, ADGM or other jurisdictions may be governed by different frameworks. The legal status of client assets, competing claims and restrictions on individual enforcement must be assessed within the relevant process.
Even where custody rules require segregation, that protection should not be treated as a guarantee of full recovery. An asset shortfall, disputed ownership or competing claims can complicate the outcome.
Customers should also examine insurance and settlement proposals carefully. A statement that a provider has insurance does not establish that a particular loss is covered. The relevant policy, insured entity, exclusions and coverage limits may all affect a potential claim.
Likewise, an offer of replacement tokens, reduced balances or staged repayments should be reviewed against the rights the customer may be giving up. Any settlement should clearly identify the assets or currency involved, payment schedule, transfer costs and consequences if the agreed payments are not made.
Ultimately, Crypto Custody Disputes require a case-specific assessment rather than an assumption that a frozen balance proves wrongdoing or guarantees recovery. Preserving original records, identifying the responsible entity and understanding the custody agreement can help customers determine which steps are appropriate.
Customers preparing for a legal consultation should gather their account terms, statements, transaction references, withdrawal requests, communications and any security incident or insolvency notice. Private keys and recovery phrases should not be included in ordinary correspondence.
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