These changes stem from the proposals outlined in 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 Centre (DIFC)."

The amendments address the following areas:

Funds:

• The ability to offer Units of External and Foreign Funds investing in recognised crypto tokens
• The ability for Domestic Qualified Investor Funds to invest in unrecognised crypto tokens

Custody:

• Custody of crypto tokens
• Staking of crypto tokens

Financial crime:

• Financial crime (including the “travel rule”) compliance guidance
• Transaction monitoring and blockchain analysis

Recognition of crypto tokens:

• Recognition criteria for fiat crypto tokens (stablecoins)
• Fee for recognition of crypto tokens.

At the same time, the authority also enacted a new Law of Security, replacing the 2005 law. The revised regime is modelled on the UNCITRAL Model of Secured Transactions and enhances DIFC’s securities regime "to keep pace with international developments in this field and to ensure DIFC remains at the forefront of best practice".

The consultation seeks public comment on proposals for amendments to the regulatory regime for persons wishing to provide financial services activities in respect of crypto tokens. The development of these proposals is based on the DFSA's "supervisory experience, recent market events and recommendations from international standard setters."

The proposals in the consultation relate only to crypto tokens and do  not cover rgulation of investment tokens. 

The deadline for comments is 4 March 2024.

The DAL lays down the foundational legal characteristics of a Digital Asset as a matter of property law. It addresses issues such as how one acquires and transfers title to a digital asset, how a digital asset should be characterised as a matter of property law, and the circumstances under which one can sue a third party for interfering with the use of a digital asset.

Deadline for comments is 5 November 2023.

Virtual asset service providers licensed to carry out custody services may now, with specific additional approval from VARA, provide staking services to their customers from the same legal entity and without obtaining a separate licence for VA Management and Investment Services.

Additional licensing and supervision fees will be payable in connection with the provision of this additional service.

The paper seeks comments on the DFSA's proposals to make several amendments to its policy framework, including proposals in relation to the Crypto Token regime that will result in changes to the DFSA Rulebook.

Deadline for comments is 26 May 2023.

The regulatory framework is focused on the risks that each virtual asset activity presents to the market, and seeks to provide virtual asset service providers (VASPs) with a "clear framework of rules which apply to their particular operations and business models, while maintaining a baseline market standard of compliance across core regulatory domains."

VASPs that fulfil VARA's licensing requirements will be required to comply with four Compulsory Rulebooks:

Company Rulebook;

Compliance & Risk Management Rulebook;

Technology & Information Rulebook; and 

Market Conduct Rulebook.

Additionally, seven activity-specific Rulebooks have been developed to cater for risks associated with the provision of each virtual asset activity:

Advisory Services Rulebook;

Broker-Dealer Services Rulebook;

Custody Services Rulebook;

Exchange Services Rulebook;

Lending & Borrowing Services Rulebook;

Payments & Remittances Services Rulebook; and 

Management & Investment Services Rulebook.

VASPs will be required to comply with each activity Rulebook only if they are licensed by VARA to offer the activity.