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Dubai Financial Regulator Releases Framework for Investment Tokens

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Dubai financial service authority issues framework for investment tokens

Dubai financial regulator has issued a framework to enable persons interested in issuance, trading, marketing or holding investment tokens.

The Dubai Financial Services Authority (DFSA) announced the launch of the framework for investment tokens on Monday, 25th October. The framework reflects the proposal contained in Consultation Paper 138 released earlier in March.

According to the Dubai Financial Services Authority, the framework defines investment token as either a Security Token or a Derivative Token and it applies to persons interested in the issuance, trading, marketing or holding of investment tokens in or from the Dubai Financial Service Center (DFIC) and authorized firms desirous to take on financial services relating to Investment tokens such as dealing in, advising on, or arranging transactions relating to, Investment funds investing in investment Tokens or, managing discretionary portfolios or collective investment funds investing in investment tokens.

Based on the framework, Security or Derivative basically are;

“a Security or Derivative in the form of a cryptographically secured digital representation of rights and obligations that is issued, transferred and stored using Distributed Ledger Technology (DLT) or other similar technology; or

a cryptographically secured digital representation of rights and obligations that is issued, transferred and stored using DLT or other similar technology and: (i) confers rights and obligations that are substantially similar in nature to those conferred by a Security or Derivative; or (ii) has a substantially similar purpose or effect to a Security or Derivative.”

The DFSA revealed it is drawing up proposals for tokens that are not covered by the Investment Tokens regulatory framework.

These proposals are expected to cover utility tokens, stablecoins and exchange tokens.

The DFSA Managing Director, Head of Strategy, Policy and Risk, Peter Smith speaking said  “Creating an ecosystem for innovative firms to thrive in the UAE is a key priority for both the UAE and Dubai Governments, and the DFSA. Our consultation on Investment Tokens enabled us to understand what firms were looking for in a regulatory framework and introduce a regime that is relevant to the market. We look forward to receiving applications from interested firms and contributing to the ongoing growth of future-focused financial services in the DIFC.”

Just over a month ago, Dubai officially welcomed crypto products and companies to the region by creating an economic free zone for crypto based products.

The Dubai World Trade Center Authority (DWTCA) and the Securities Commodities Authority (SCA) entered into an agreement to support the regulation, offering, issuance, listing and trading of crypto assets and other activities within the Dubai free trade zone.

Earlier this in October, the Dubai Police partnered with BitOasis to educate investors on internet fraud involving cryptocurrencies. The police hope to combat financial crimes that are crypto related and help to provide a safe environment for investors.

The Dubai Financial Service Authority also revealed it will issue a second consultation paper before year end and this will cover exchange tokens, utility tokens and stablecoins.

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