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UAE Authorities Unveil Regulatory Framework for Security Tokens

The Dubai Financial Services Authority (DFSA) has introduced a new regulatory framework for security tokens in the region. Dubbed the Investment Tokens regulatory framework, the rules apply to both individuals and firms looking to engage in any form of financial activity related to security tokens.

DFSA Regulates Security Tokens

The Dubai Financial Services Authority (DFSA) has introduced a fresh regulatory framework for security tokens. The DFSA says the framework is part of its digital assets regulation exercise outlined in Consultation Paper 138 issued last March.

The new Investment Tokens regulatory framework defines these types of assets as security or derivative tokens issued, secured, stored, and transferred using distributed ledger technology (DLT) or similar technologies.

“A cryptographically secured digital representation of rights and obligations that are issued, transferred and stored using DLT or other similar tech and confers rights and obligations that are substantially similar in nature to those conferred by a Security or Derivative or has a substantially similar purpose or effect to a Security or Derivative,” wrote the DFSA.

The DFSA has made it clear that the new Investment Token regulatory framework applies to any person around the Dubai International Financial Centre (DIFC) that engages in financial activities related to the issuance, trading, holding these digital assets, as well as firms that offer advisory services, custodial services and others related to security tokens.

More Crypto Regulations in the Works

With the security token regulatory framework now live the watchdog has hinted that it’s also formulating amenable laws to govern other public cryptocurrencies, including stablecoins and utility tokens. The regulator says it plans to issue another consultation paper in Q4, 2021.

Commenting on the implementation of the new regulatory framework for security tokens, Peter Smith, Managing Director, Head of Strategy, Policy and Risk at the DFSA stated that creating amenable rules for crypto-related businesses in the region remains one of the regulator’s ultimate objectives.

“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,” he added.

In related news, as informed last September that top financial regulators in the UAE, including the Securities and Commodities Authority (SCA) and the Dubai World Trade Centre Authority (DWTCA), have legalized crypto trading in the region.

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