Dubai Financial Services Authority is banning the use of privacy coins on exchanges and tightening stablecoin regulations as part of a crypto regulatory overhaul, CoinDesk reported on Jan. 12.

The new rules apply to exchanges regulated in the Dubai International Financial Centre. They shift responsibility for token approvals to firms and tighten the definition of stablecoins.

The measures also include a blanket ban on privacy-coin trading, promotion, fund activity and the use of derivatives, citing anti-money laundering and compliance with international sanctions. Elizabeth Wallace, DFSA deputy head of policy and legal, said privacy coins cannot meet Financial Action Task Force standards because they hide transaction records and owners.

The rules also bar exchanges from using privacy tools such as mixers, tumblers and blenders. This contrasts with Hong Kong's limited acceptance of privacy coins and resembles moves by the European Union to exclude privacy coins and mixers from regulated markets, CoinDesk said.

Stablecoin regulations have also been tightened. DFSA defines stablecoins only as "high-quality liquid assets" pegged to fiat currency, and said algorithm-based stablecoins do not qualify. As a result, algorithm-based stablecoin Ethena is not recognised as a stablecoin under DFSA rules, but it is not banned, CoinDesk said.