Dubai Financial Services Authority Unveils Regulatory Framework for Digital Assets

Jafrin  |  Oct 25, 2021

The Dubai Financial Services Authority, the regulator of the Dubai International Financial Centre has unveiled a regulatory framework concerning digital assets.

Dubai Financial Services Authority Wants Regulatory Framework

In its proposed regulations outlined in Consultation Paper 138 issued in March 2021, the DFSA stressed the importance of regulating security tokens for public consultation, which included clauses to tackle investor protection issues and misconduct risks, as well as address market integrity, financial stability, money laundering, and terrorism financing threats.

The regulatory framework applies to persons or entities interested in the market, issue, trade or holds investment tokens in or from the Dubai International Financial Centre (DIFC) as well to Authorised Firms wishing to undertake Financial Services relating to Investment Tokens, such as dealing in, advising on, or arranging transactions relating to, Investment Tokens, or managing discretionary portfolios or collective investment funds investing in Investment Tokens.

The DFSA is formulating proposals for other tokens not covered by the Investment Tokens regulatory framework which includes cryptocurrencies, utility Tokens, and certain asset-backed Tokens or Stablecoins.

“Creating an ecosystem for innovative firms to thrive in the UAE is a key priority for both the UAE and Dubai governments, and the DFSA,” Peter Smith, managing director and head of strategy, policy and risk at the DFSA, said.

DFSA Also Formulating Proposals for Other Tokens

The DFSA defines an investment token as either a security token or a derivative token that is a “cryptographically secured digital representation of rights and obligations that is issued, transferred and stored using Distributed Ledger Technology (DLT) or other similar technology”.

The DFSA is also formulating proposals for other tokens not covered by the investment tokens regulatory framework and intends to issue a second consultation paper on this in the fourth quarter of this year. These are expected to cover exchange tokens, or cryptocurrencies, utility tokens, and certain asset-backed tokens such as stablecoins.

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