The emirate’s free trade zone has its own legal system and courts. Now its crypto regulations have been augmented and extended to all tokens recognized in the zone.
The Dubai Financial Services Authority (DFSA) announced on Nov. 1 that its crypto token regime has come into force in the Dubai International Financial Centre (DIFC) special economic zone, with a six-month transition period. The new regime is the DFSA’s second round of regulations, building on the “Regulation of Investment Tokens” introduced at the DIFC in October 2021.
— DIFC (@DIFC) November 1, 2022
Crypto tokens are understood to be any token besides the previously defined investment tokens, with the exception of utility tokens, nonfungible tokens, central bank digital currencies, privacy tokens and algorithmic tokens. Tokens must be recognized by the DFSA to be used in the DIFC, following an established application process. Stablecoins, or “fiat crypto tokens,” are subject to additional requirements.
The new regime addresses Anti-Money Laundering and Countering the Financing of Terrorism, as well as consumer protection, market integrity, custody and financial resources for service providers. The regulations were first described in a consultative paper in March. That paper underwent an extensive comments process.
DFSA chief executive Ian Johnston said:
“Our work to develop a comprehensive Crypto Token regime has taken into account feedback from a broad range of stakeholders. It aims to strike a balance between encouraging innovation in the DIFC and protecting the consumers of these financial products.”
Established in 2004, the DIFC is home to over 4,000 companies that are subject to the center’s own legal and court system and special tax agreements. The DFSA regulates only the DIFC.
The Dubai Virtual Asset Regulatory Authority was set up in March to oversee virtual assets in the rest of the emirate, including its other free trade zones, such as the Dubai Multi Commodities Centre. It has licensed several crypto-related firms and opened a headquarters in The Sandbox metaverse world.