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The Dubai Financial Services Authority makes key changes to its crypto token regime
The Dubai Financial Services Authority (DFSA) today announced some key changes to its crypto token regime.
These changes stem from Consultation Paper 153 – Updates to the Crypto Token Regime published in January 2024 and mark a significant step in refining and advancing the regulatory environment for crypto tokens in the Dubai International Financial Center (DIFC).
The changes affect funds, custody, financial crime and crypto token recognition, more details Here.
A key change now allows domestic qualified investor funds to invest in unrecognized tokens, as long as the exposure does not exceed 10% of the fund’s gross asset value (GAV). Until now the DFSA had only recognized five cryptographic tokens: Bitcoin, Ether, Litecoin and Toncoin.
Previously, the fee for requesting token recognition was $10,000 per token, which many companies considered excessively high, particularly for those seeking recognition for multiple tokens.
In response to this feedback, the DFSA reduced the fee to $5,000 and introduced additional recognition criteria for stablecoins, which are cryptographic tokens pegged to fiat currencies.
The new regime will give the possibility to offer shares of external and foreign funds that invest in recognized cryptographic tokens and the possibility for funds of domestic qualified investors to invest in unrecognized cryptographic tokens.
The changes are based on recent market developments, recommendations from international standards bodies and the DFSA’s supervisory experience, the DFSA said.
Over the past two years, the DFSA said it has worked with more than 100 license-seeking companies, “gaining valuable insights into market dynamics and regulatory needs”.
Since the crypto token regime came into force in 2022, international standards have evolved significantly. The International Organization of Securities Commissions (IOSCO) has released recommendations on cryptocurrencies, digital assets and decentralized finance (DeFi).
Additionally, the Basel Committee has proposed changes to the standards for banks’ exposures to Crypto assets, focusing on reserve assets of stablecoins.
Ian Johnston, Chief Executive of the DFSA, said: “Our aim with the crypto token regime is to promote innovation in a responsible and transparent way, whilst ensuring we achieve our regulatory objectives. At the DFSA, we have taken a balanced in the development of this regime and we remain committed to evolving it in line with best practices and global standards.”