DFSA launches consultation over new DIFC crypto token rules

The Dubai Financial Services Authority (DFSA) has issued a consultation paper (16-page / 505KB PDF) which proposes amendments to the regulatory framework for crypto tokens in the DIFC.

Under the proposed changes, firms will now assess and publish the suitability of non-fiat crypto tokens, replacing the DFSA’s central recognised token list.  Restrictions on funds investing in crypto tokens, whether directly or indirectly, will be removed, along with limits on the percentage and type of tokens used in net asset tests for assessed professional clients.

The DFSA will retain oversight of fiat crypto tokens and said that it will issue a new policy statement to clarify its approach. The recognised jurisdictions list will also be removed for crypto tokens to expand market access.

Jessica White, a financial regulation expert with Pinsent Masons in the Middle East, said: “These proposals reflect the DFSA's continued efforts to align with evolving global regulatory standards while offering firms greater flexibility to support responsible innovation and market development in the DIFC.”

Companies impacted by the new regulations should review the proposed monthly reporting requirements via the DFSA e-portal, and take note of the updated penalties for non-compliance, she added.

The move comes just days after the Financial Services Regulatory Authority in the Abu Dhabi Global Market revealed revamped rules for fiat-pegged crypto tokens.

Clients and market participants in the DIFC should review their internal crypto token assessment processes to prepare for firm-led suitability obligations and to evaluate their reporting systems to meet the proposed monthly compliance requirements. They should also assess the impact of changes to jurisdictional scope and fund-related rules, White said.

 Feedback can be submitted to the DFSA before the consultation closes on 31 October.

“The proposed changes reinforce the DFSA's broader commitment to maintaining a secure, transparent and forward-looking environment for crypto token activities - supporting Dubai and the UAE's strategic ambitions in the digital economy,” said White.