Crypto Regulation & Investment Trends: Key Updates for Q3 2024
- The UAE is enacting new financial laws to bring DeFi and Web3 under regulatory oversight, effective September 2025.
- Crypto projects experienced their second-best quarter for venture capital funding since Q3 2022, reaching $4.65 billion in Q3.
- Japan’s financial regulator is set to mandate liability reserves for cryptocurrency exchanges to protect customer assets.
- DeFi protocols can no longer claim immunity from regulations due to their decentralized nature in the UAE.
- Venture capital activity in the crypto space shows a significant rebound, with stablecoins, AI, and blockchain infrastructure being key investment areas.
UAE’s New Financial Law Integrates DeFi and Web3 into Regulatory Framework
A significant regulatory shift is underway in the United Arab Emirates, with the introduction of Federal Decree Law No. 6 of 2025. This new central bank law brings decentralized finance (DeFi) and the broader Web3 industry under defined regulatory parameters. Industry experts note this as a pivotal moment for the region’s crypto sector.
This legislation specifically targets protocols, DeFi platforms, middleware, and infrastructure providers that facilitate activities like payments, exchanges, lending, custody, or investment services. For projects operating within the UAE, aligning their systems with these new regulations is crucial, with a transition deadline set for September 2026.
Legally effective since September 16, 2025, the decree expands the Central Bank of the UAE’s (CBUAE) oversight to include digital asset-related activities. Articles 61 and 62 of the law clearly outline activities requiring a license from the CBUAE, such as crypto payments and digital stored value services.
💡 The UAE’s new law signifies a global trend towards regulating previously nascent digital asset sectors. Understanding the scope of licensed financial activity is key for compliance, as the law emphasizes that activities are regulated regardless of the technology used.
Crucially, the UAE’s new financial law means that DeFi projects can no longer rely on being just code or the argument of decentralization to avoid regulatory scrutiny. The CBUAE’s perimeter now explicitly includes entities enabling regulated financial activities, irrespective of their operational structure or technological backbone.
Crypto Venture Capital Investment Surges to $4.6 Billion in Q3
The third quarter of the year marked a substantial recovery for crypto-focused venture capital investment, reaching $4.65 billion. This figure represents the second-highest quarterly funding amount since the collapse of FTX in late 2022, which had previously dampened venture enthusiasm for crypto assets.
Reports indicate a massive 290% quarter-on-quarter increase in venture bets, making Q3 the strongest quarter since Q1 of the same year, which saw $4.8 billion invested. Despite remaining below the peak levels seen during the 2021-2022 bull market, venture activity is characterized as active and healthy.
📊 Key sectors driving this investment surge include stablecoins, artificial intelligence (AI), blockchain infrastructure, and trading platforms. Pre-seed activity also remains consistent, indicating ongoing innovation and early-stage development within the crypto ecosystem.
A total of 414 venture deals were recorded in Q3. Notably, seven significant deals accounted for half of the total capital raised. Among these were substantial investments in financial technology company Revolut ($1 billion), crypto exchange Kraken ($500 million), and crypto-focused bank Erebor ($250 million).
Interestingly, established companies founded before 2018 attracted the largest share of capital. Conversely, newer ventures founded in 2024 secured the highest number of individual deals, suggesting a dual dynamic of established players consolidating and new ventures emerging vigorously.
Japan’s Financial Watchdog to Mandate Liability Reserves for Crypto Exchanges
In an effort to bolster protection against hacks and unforeseen events, Japan’s Financial Services Agency (FSA) is reportedly preparing to require cryptocurrency exchanges to maintain liability reserves. This move aims to safeguard customer assets more effectively.
The FSA plans to revise its regulations for domestic crypto firms, incorporating mandates for mechanisms that enable prompt compensation to users affected by security breaches or other disruptions. This proactive step is reportedly influenced by recent high-profile exchange hacks globally.
âš¡ The implementation of liability reserves is a critical step towards enhancing user trust and financial stability within the cryptocurrency market. It reflects a maturing regulatory approach, prioritizing investor protection in line with traditional financial systems.
An advisory body to the FSA, the Financial System Council, is expected to release a report detailing these recommendations soon. A key proposal is the requirement for crypto firms to establish dedicated liability reserve funds to address potential losses.
This development follows other regulatory considerations in Japan, including potential reviews that could permit banks to hold crypto assets. Japan continues to be a significant market for cryptocurrency adoption, with a substantial number of registered accounts reflecting strong user engagement within its population.
Frequently Asked Questions about Cryptocurrency Regulation and Investment
What is the main impact of the UAE’s new financial law on DeFi?
The UAE’s new Federal Decree Law No. 6 of 2025 brings DeFi protocols and Web3 infrastructure providers under the regulatory purview of the Central Bank of the UAE (CBUAE). This means they can no longer operate without adhering to licensing and compliance requirements, regardless of their decentralized nature.
How significant was the Q3 2024 venture capital funding for crypto projects?
Q3 2024 saw a substantial surge in crypto venture capital funding, reaching $4.65 billion. This marks the second-highest quarterly funding since Q3 2022 and represents a significant rebound in investment activity within the digital asset space.
What measure is Japan’s FSA implementing to protect crypto users?
Japan’s Financial Services Agency (FSA) is planning to require cryptocurrency exchanges to maintain liability reserves. This measure is designed to ensure that exchanges have sufficient funds available to compensate users impacted by security breaches or other unforeseen operational issues.
Can DeFi projects still claim exemption based on decentralization in the UAE?
No, the UAE’s new financial law explicitly states that the argument of decentralization does not exempt a protocol from compliance. If a DeFi project enables regulated financial activities, it falls under the CBUAE’s regulatory scope.
Which sectors are attracting the most venture capital in the current crypto market?
Current venture capital investments are predominantly flowing into sectors such as stablecoins, AI, blockchain infrastructure, and trading platforms. These areas are showing strong potential and innovation, attracting significant funding rounds.
Future Outlook for Crypto Regulation and Venture Activity
The evolving regulatory landscape, exemplified by the UAE and Japan’s recent actions, indicates a maturing phase for the cryptocurrency industry. As regulators establish clearer frameworks, particularly for DeFi and Web3, the industry can anticipate greater institutional adoption and investor confidence.
The robust venture capital activity in Q3 2024 signals a strong underlying belief in the long-term potential of blockchain technology and its applications. Continued investment in key sectors suggests that innovation will persist, driving the development of new use cases and services.
Ultimately, these developments point towards a future where innovative digital assets and decentralized technologies can coexist with robust regulatory oversight, fostering a more stable and trustworthy environment for both developers and users alike.
