As countries around the world face regulatory uncertainty, Dubai Financial Services Authority (DFSA) has created a regulatory framework for investment tokens. Also, work will soon be initiated to regulate other altcoin projects. Here are the details…
Dubai offers a framework for issuing altcoin tokens
According to the DFSA, the framework is reflected in the proposed provisions in the Consultation Paper published in early March. It is also the first of two phases of the DFSA’s Cryptocurrency regime. The regulatory framework defines two categories of investment tokens, namely Securities Tokens or Derivatives Tokens. These are further detailed in the announcement as follows:
A security or derivative in the form of a cryptographically secure digital representation of rights and obligations issued, transferred, and retained using distributed ledger technology (DLT) or other similar technologies.
In the second point, the following was noted:
Cryptographically secure digital representation of rights and obligations issued, transmitted and stored using DLT or other similar technologies, and: (i) confer rights and obligations substantially similar in nature to those granted by a Security or Derivative; or (ii) has a substantially similar purpose or effect to a Security or Derivative Product.
Proposals are being prepared for tokens that have not yet been identified
The regulatory framework applies to individuals or entities wishing to market, trade, issue or hold investment tokens at the Dubai International Financial Center (DIFC). It also applies to portfolio managers and mutual funds, as well as companies that wish to perform financial services related to cryptocurrencies, such as trading, consulting or arranging transactions related to these tokens.
The announcement further noted that Dubai’s financial watchdog is preparing proposals for tokens that are not covered in the current framework. These will also include stablecoins and utility tokens, as well as exchange tokens or cryptocurrencies.
Dubai has taken regulatory initiatives towards the adoption of crypto and Blockchain technology, allowing it to benefit from the growing crypto market in the region. The country’s tax-free policies, combined with its significant immigrant population, have made it an ideal crypto hub. With the introduction of regulated crypto exchanges and these regulations, such a transformation would not be far away.
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