Dubai Financial Authority introduces regulatory framework for investment tokens

Dubai Financial Services Authority (DFSA) announced that it has introduced a regulatory framework for investment tokens.

Reflecting the proposals outlined in a consultation paper published in March, the framework marks the first phase of DFSA’s digital assets regime. regulatory framework defines investment tokens as security tokens or derivative tokens.

announcement more specifically defines investment tokens as “a security or derivative in the form of a cryptographically protected digital representation of rights and obligations that is issued, transferred and stored using distributed ledger (DLT) or other similar technology.”

previous definition has also been included that “confers rights and obligations of a nature substantially similar to those conferred by a security or derivative, or that has a purpose or effect substantially similar to a security or derivative.”

mandate of the regulation

financial authority has stated that the regulatory framework will apply to anyone interested in trading, issuing, trading or holding investment tokens, in relation to the Dubai International Financial Center (DIFC). It also applies to “licensed companies” looking to offer financial services related to investment tokens. se services include trading, advising and organizing transactions, as well as portfolio and investment token fund management.

“Creating an ecosystem for innovative companies to thrive in the UAE is a key priority for the UAE and Dubai governments and the DFSA,” said Peter Smith, DFSA Executive Director, Head of Strategy, Policy and risk. “Our consultation of investment files allowed us to understand what companies were looking for in a regulatory framework and introduce a relevant regime for the market.”

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Although it is cryptographically protected through DLT, the announcement does not define investment tokens as cryptocurrencies. What the authority called an “exchange token” would be covered by new proposals, along with utility tokens and “some asset-backed tokens (stablecoins).” DFSA said it will publish its second consultation paper later in the fourth quarter. Dubai has reportedly become one of the most cooperative environments for cryptocurrency investments.

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