Dubai regulator DFSA issues new framework for investment tokens

New regulation applies to persons, entities dealing in or advising on investment tokens

The use of investment tokens will now be regulated in Dubai, according to an announcement by the Dubai Financial Services Authority (DFSA).

The authority, which oversees financial services in the Dubai International Financial Centre (DIFC), announced on Monday the launch of its regulatory framework for investment tokens.

The framework applies to individuals or entities interested in marketing, issuance, trading or owning investment tokens in or from the DIFC, the DFSA said in a statement.

The authority also said it is still formulating proposals for “exchange tokens”, also commonly known as cryptocurrencies.

New regulations 

The DFSA said the new regulatory framework applies to companies looking to undertake financial services related to investment tokens.

Business activities that will be subject to the regulation include dealing in, advising on, or arranging transactions relating to investment tokens.

Those managing discretionary portfolios or collective investment funds investing in tokens are also covered by the regulatory framework.

“The DFSA is formulating proposals for other tokens not covered by the investment tokens regulatory framework. These are expected to cover exchange tokens (also known as cryptocurrencies), utility tokens and certain asset-backed tokens,” the statement said.

“The DFSA intends to issue a second consultation paper covering these matters later in Q4.”

With the new regulation, the DFSA is expected to receive applications from “interested firms”, said Peter Smith, Managing Director, Head of Strategy, Policy and Risk at the DFSA.

What are investment tokens? 

The new regulatory framework defines an investment token “as either a security token or a derivative token”.

The security or derivative token can be 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 token can also be a cryptographically secured digital representation of rights and obligations that is issued, transferred and stored using DLT or other similar technology, the DFSA said.

(Writing by Cleofe Maceda; editing by Seban Scaria) 

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2021

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