Dubai Financial Services Authority (DFSA) launched a regulatory framework for investment tokens
As countries worldwide face regulatory uncertainty, the Dubai Financial Services Authority (DFSA) has come up with a regulatory framework for investment tokens. Furthermore, a framework for other cryptocurrencies will be launched soon.
Dubai regulatory watchdog introduces a framework for token regulation
According to DFSA, the framework was reflected in the provisions proposed in the Consultation Paper issued earlier in March. Furthermore, it is the first of two phases of the DFSA’s Digital Assets regime.
The regulatory framework has defined an Investment Token as either a Security Token or a Derivative Token. The definition was further elaborated in the announcement as:
“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.”
The second point noted:
“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 framework applies to individuals or entities wishing to market, trade, issue, or hold investment tokens in or from the Dubai International Financial Center (DIFC). It also applies to companies that wish to perform financial services related to cryptocurrencies, such as trading, advising, or arranging transactions related to these tokens, along with portfolio managers and investment funds.
The announcement also noted that Dubai’s financial watchdog is drawing up proposals for those tokens that were not covered in the current framework. These will further cover exchange tokens, or cryptocurrencies, along with stablecoins and utility tokens.
Dubai has long demonstrated regulatory initiative towards crypto and blockchain adoption, allowing it to capitalize on the growing crypto market in the region. The country’s tax-free policies, coupled with its substantial 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 too far off.
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