Dubai Financial Services Authority Launches Framework for Investment Tokens

The authority introduced a regulatory framework to provide clarity on the status of investment tokens.

Dubai Financial Services Authority (DFSA) became the latest financial regulatory authority to launch a clear regulatory structure for investment tokens in the region. In a recently issued press release, the DFSA mentioned that the regulatory framework defines investment tokens as either a security token or a derivative token.

Additionally, the authority is drawing up proposals for tokens not covered under the investment token regulatory framework. Dubai Financial Services Authority is planning to issue a second consultation paper in the last quarter of 2021.

The Investment Tokens regulatory framework applies to people who are interested in the issuance, trading and holding of investment tokens in the region. DFSA also outlined the growing use of Distributed Ledger Technology (DLT).

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“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. Our consultation on Investment Tokens enabled us to understand what firms were looking for in a regulatory framework and introduce a regime that is relevant to the market. We look forward to receiving applications from interested firms and contributing to the ongoing growth of future-focused financial services in the DIFC,” Peter Smith, Managing Director, Head of Strategy, Policy and Risk at the DFSA, commented.

Crypto Adoption in Dubai

The adoption of blockchain technology and digital assets in Dubai has increased rapidly during the last few months. In September 2021, the Securities and Commodities Authority (SCA), UAE’s financial regulator, and the Dubai World Trade Centre Authority (DWTCA) signed an agreement to support the trading, listing and issuance of digital assets within DWTCA’s free zone.

Through the recent framework, DFSA aims to increase the adoption of DLT and digital assets in the region under a regulated environment. “The DFSA is drawing up proposals for tokens not covered by the Investment Tokens regulatory framework. These are expected to cover exchange tokens (also known as cryptocurrencies), utility tokens and certain asset-backed tokens (stable coins). The DFSA intends to issue a second consultation paper later in Q4,” DFSA added.

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