Dubai Regulator Updates Crypto Token Rules for Funds

The Dubai Financial Services Authority (DFSA) has introduced updates to its cryptocurrency token regulations, aiming to refine the regulatory landscape within its jurisdiction. The DFSA, which operates independently within the United Arab Emirates (UAE), is responsible for overseeing entities based in the Dubai International Financial Centre (DIFC), a recognized special economic zone. On June 3, the DFSA unveiled the revised crypto token framework to integrate insights from Consultation Paper 153, which was released in January 2024. These updates cover critical aspects such as fund investments in crypto tokens and the procedures for recognizing these tokens.

One of the significant changes pertains to funds, impacting the way external and foreign funds can offer units involving recognized crypto tokens. Historically, the DFSA had imposed stringent restrictions on fund activities related to crypto tokens. In the recent consultation paper, fund and asset managers voiced concerns over what they deemed an overly rigid regime. They argued that the existing rules, particularly those limiting external and foreign funds’ investments in crypto tokens, were too restrictive. This feedback has led the DFSA to re-evaluate its stance.

The amendments addressed the investment capacity of domestic qualified investor funds in unrecognized tokens. Since the regime’s inception, only five crypto tokens were officially recognized: Bitcoin, Ether, Litecoin, XRP, and Toncoin (TON). While the DFSA acknowledges the importance of a recognition process, it also opened the door for domestic funds to invest in unrecognized tokens, provided that such investments do not exceed 10% of the fund’s gross asset value (GAV).

Another key area of change involves the fees and criteria for token recognition. Originally, the application fee for recognizing a token was set at $10,000 per token, a cost many stakeholders found prohibitive, especially for firms looking to recognize multiple tokens. Responding to this feedback, the DFSA halved the fee to $5,000 and established additional recognition criteria specifically for stablecoins, which are crypto tokens pegged to fiat currencies.

Despite these changes, the DFSA has made it clear that they are not adopting a more lenient regulatory approach. The consultation paper stressed that the adjustments are meant to provide flexibility for recognizing fiat-pegged crypto tokens issued in jurisdictions with comparable regulations, rather than a relaxation of standards.

In a press release, DFSA chief executive Ian Johnston articulated the regulator’s goal of fostering innovation in a responsible and transparent manner within the crypto market. Johnston stated that the DFSA is committed to evolving its regulatory framework in line with global best practices and standards, balancing innovation with regulatory objectives.

The announcement of the amendments reflects the DFSA’s efforts to stay abreast of market developments, heed international recommendations, and incorporate their supervisory experience. Over the past two years, the DFSA has engaged with more than 100 firms seeking licensing, gaining invaluable insights into market dynamics and regulatory requirements.

These updates mark a proactive step by the DFSA to support the evolving regulatory needs of the cryptocurrency market while maintaining a robust and flexible regulatory approach. The changes aim to strike a balance between fostering growth and ensuring that the crypto space operates within a secure and transparent framework.

By addressing the concerns of industry stakeholders and adjusting regulations accordingly, the DFSA reaffirms its commitment to supporting innovation while upholding high regulatory standards. This approach underscores the DFSA’s role as a forward-thinking regulatory body dedicated to the sustainable growth of the cryptocurrency market within the DIFC.

Idell Bruni

Idell Bruni

28 thoughts on “Dubai Regulator Updates Crypto Token Rules for Funds

  1. Positive changes like these make all the difference. Thank you DFSA for supporting innovation and growth!

  2. Hats off to the DFSA for continuously evolving and improving the regulatory landscape!

  3. This just complicates things further. Why can’t we have straightforward regulations for a change?

  4. Bravo, DFSA! This new framework shows your dedication to innovation and regulatory excellence. 🥂

  5. Even with these changes, the process is still too bureaucratic and slow. We need faster and more progressive regulations.

  6. Kudos to the DFSA for acting on stakeholder feedback and refining the crypto regulations. Onwards and upwards!

  7. Big thumbs up to the DFSA for halving the token recognition fee and making the process more flexible.

  8. Why limit to five recognized tokens still? The crypto world is much larger and more dynamic than that.

  9. Great leadership shown by the DFSA with these updates! It’s great to see a regulator that’s proactive and responsive.

  10. These changes feel like window dressing. DFSA is still more focused on control than actual innovation.

  11. Well done DFSA! These changes are exactly what the industry needed to keep growing and innovating.

  12. Another missed opportunity by DFSA. They adjusted the fees but barely made any real progress.

  13. A well-balanced approach by the DFSA, supporting both growth and security in the crypto space.

  14. The so-called “flexibility” for fiat-pegged tokens is a joke. It’s barely a step forward.

  15. This news is a breath of fresh air! The DFSAs updated framework is going to do wonders for the crypto industry.

  16. Incredible to see DFSA adapting to the evolving needs of the crypto market! This will definitely boost investor confidence. 💪

  17. Absolutely love seeing this proactive approach! The DFSA is setting a high bar for global crypto regulation.

  18. Fantastic news! These refined regulations by the DFSA will surely foster a thriving crypto ecosystem in Dubai. 🌟

  19. Great update from the DFSA! This will surely attract more international crypto investors to Dubai.

  20. Fantastic to see the DFSAs commitment to a transparent and robust crypto market. Here’s to more innovation!

  21. Exciting times for the crypto community in Dubai! The DFSAs updates are paving the way for a safer and more robust crypto market.

  22. These restrictions could stifle the market rather than foster innovation. DFSA needs to rethink their strategy.

  23. Great to see the DFSA taking proactive steps! The new updates definitely show they’re listening to industry feedback.

  24. DFSAs updates sound good on paper but won’t make a significant difference in practice.

  25. These updates are a significant step forward! Cheers to the DFSA for refining the regulatory framework.

  26. Impressive amendments by the DFSA, showing dedication to fostering a secure and innovative crypto market.

  27. Huge thanks to the DFSA for making crypto investments more accessible and reasonable. 💼 This is a win for both investors and innovators!

  28. These changes show that the DFSA is very serious about fostering a safe and innovative crypto environment. Bravo!

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