Emirates of Dubai fostering digital asset innovation in a “measured, responsible and transparent way by Introducing a New Crypto Token Regime

08 November 2022

Ajmal Khan

Emirates of Dubai fostering digital asset innovation in a “measured, responsible and transparent way by Introducing a New Crypto Token Regime

Dubai Financial Services Authority ushers in the Crypto Token Regime from 1st November 2022 with a “balanced approach” in developing the framework further which is in alignment with best practices and standards adopted by international standard-setters”

The new "Crypto Token Regime" came into force on 1 November 2022, with two major changes to the DIFC Consultation Paper:

1) DFSA will publish an initial list of "pre-recognized" list of crypto tokens that will be immediately available to firms with appropriate permissions in conducting financial services in or from the Dubai International Financial Centre ("DIFC").

2) Non-Fungible Tokens and utility Tokens will remain outside the purview of financial services regulation, to be brought within the remit of the DFSA's anti-money laundering and counter-terrorist financing ("AML") regime.

This comes as a sigh of relief for authorized firms already engaging in Crypto Token activities. They will have a six-month transitional period, in which they can continue those activities while seeking to obtain an appropriate license variation. It is further important to note that the regime also addresses various risks related to Consumer Protection, Financial Resources for the Service Providers as well as Market integrity. Keeping the risks of digital assets in mind only DFSA-approved crypto tokens that meet certain requirements can be used in the DIFC. The DFSA will publish an initial list of recognized crypto tokens on its website.

The Crypto Token Regime is a big step in developing regulatory frameworks for digital assets and builds on its previous investment Token regulations in the Emirates. The DFSA has also recognized the ever-evolving nature of crypto Assets in its media release, We should therefore expect the Crypto Token Regime in Dubai and UAE to evolve with best practices and international standards to strike a balance between encouraging innovation and Consumer protection