The Dubai Financial Services Authority (DFSA), the financial services regulator in Dubai recently issued its crypto token regime which goes into force on 1 November 2022.
The much anticipated crypto token regime was issued after the consultation period from the DFSA and sets out the new regime and the regulatory landscape which takes into account the key role of crypto tokens and virtual assets. The new regime aims to recognize and classify crypto tokens and permit existing providers in the Dubai International Financial Centre (DIFC) to develop their advising, dealing, arranging, trading and custody activities to include crypto tokens and virtual assets.
Under the updated DFSA regime, a token is considered a Crypto Token if it is:
used, or intended to be used, as a medium of exchange or for payment or investment purposes, or
confers a right or interest in another Token that meets the requirement.
The DFSA has accordingly issued amendments, to the relevant modules, under the DFSA Regulations and the Rulebook adopting the above definition of crypto tokens.
Our banking & finance teams further provides below a summary of the key take aways.
Key Take Aways
Anyone making an offering of or conducting activities related to Crypto Tokens will require approval or authorization from the DFSA;
The DFSA shall publish and maintain a register of recognized Crypto Tokens;
The DFSA shall publish an initial list of Crypto Token that are recognized;
Applications can be made for addition to the initial list provided the DFSA is satisfied the token meets DFSA’s requirements;
The DFSA Rulebook is already amended to reflect changes to client classification, recognition of comparative jurisdictions, AML and CFT, Technology Governance and prudential treatment of Crypto Token related activities under the new regime.
The amended regime is already in force as of 1 November 2022 however the DFSA has provided a transitional period of six months for all existing DFSA regulated firms to update their systems and policies in line with the updated regime. Any firm within the DIFC wishing to maintain their Crypto Token activities which they were already undertaking prior to the effective date should apply to the DFSA and request amendments to their existing license. Existing licenses can accordingly be upgraded to reflect the new activities through applications to the DFSA. For any new DFSA applicants looking to license themselves with crypto related activities, a revised fee schedule and procedure is already in effect.
The DFSA Crypto Token regime is the much anticipated update to the DFSA Rulebook and is in line with UAE & Dubai’s commitment towards becoming one of the foremost innovative jurisdictions for virtual assets activity whereby the need for innovation is carefully balanced with the need for consumer protection and AML & CFT risk inherent to virtual assets.
Further developments in this sector continue to be monitored by the regulator and the DFSA has indicated amendments to the regime may be issued on an ongoing basis as the market develops.