DFSA Amends Crypto Regulations in Dubai’s Special Economic Zone

DFSA Amends Crypto Regulations in Dubai’s Special Economic Zone

The Dubai Financial Services Authority (DFSA) has updated its cryptocurrency token rules, aiming to enhance the regulatory framework within the Dubai International Financial Centre (DIFC), a special economic zone in Dubai. These changes were announced on June 3 and stem from the DFSA’s Consultation Paper 153, published in January 2024.

The DFSA, an independent regulator in the UAE, has made significant amendments focusing on investment funds, token custody, financial crime compliance, and token recognition. The revised regulations permit units of external and foreign funds to invest in recognized crypto tokens, while domestic qualified investor funds can now invest in unrecognized crypto tokens.

New rules govern the custody and staking of crypto tokens, ensuring secure and transparent operations. The DFSA has also issued new guidelines on financial crime compliance, including the implementation of the ‘travel rule,’ which mandates sharing information about the sender and receiver of crypto transactions. Additionally, the recognition process for crypto tokens has been revised, with new criteria established for recognizing fiat-crypto tokens, commonly known as stablecoins.

The DFSA has engaged with over 100 firms seeking licenses over the past two years, gaining valuable insights into market dynamics and regulatory needs. The crypto token regime, effective since 2022, continues to evolve in line with international standards. The DFSA currently recognizes five crypto tokens: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), XRP, and Toncoin (TON).

Ian Johnston, the DFSA’s chief executive, commented, “Our goal with the Crypto Token regime is to foster innovation responsibly and transparently while meeting our regulatory objectives. We have taken a balanced approach and are committed to evolving in line with global best practices and standards.”

These regulatory changes aim to create a more secure and transparent environment for virtual asset trading in the DIFC, aligning with global best practices and supporting responsible innovation in the crypto market.

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