The Dubai International Finance Center (DIFC) is the special economic zone of the United Arab Emirates (UAE). Its regulatory arm has recently unveiled a consultation paper, which outlines the proposed regulatory measures they would take in regard to crypto tokens. The financial regulatory agency is known as the Dubai Financial Services Authority (DFSA) and it stated that the public has time till May 6th, 2022 to comment on the proposal of the regulatory agency. It said that the regulatory regime was for all those who are interested in providing financial services activities in relation to crypto tokens. After the public consultation phase is complete, the DFSA will then decide what changes to make to the draft legislation.
The paper said that after the consultation, the regulatory authority will make the changes that are necessary and will amend the proposed draft legislation accordingly. They will then submit the amended Regulatory Law and Markets Law to the President of the DIFC for his approval and will then be sent to the His Highness the Ruler of Dubai for same. The DFSA elaborated that the final version of the rulebook modules and the law will be published on their website. However, the regulatory agency did say that all interested parties should refrain from acting on the proposals until they have made all the relevant changes.
Furthermore, the DFSA had also mentioned in the consultation paper that their latest proposals are only related to crypto tokens, which are not the same as investment tokens. The regulatory agency had previously referred to these investment tokens as security tokens and it said that there was a different consultation paper for dealing with them. Moreover, the most recent consultation paper has also made an effort to distinguish between the crypto tokens as well as excluded and prohibited tokens. The DFSA elaborated that excluded token list usually comprises of utility tokens that are used within a closed ecosystem and have a specific use case.
The so-called excluded tokens’ list of the DFSA also includes central bank digital currencies (CBDCs) and non-fungible tokens (NFTs). The tokens that have been mentioned in the prohibited list of the consultation paper by the DFSA also include privacy devices and tokens and also algorithmic tokens. According to the regulatory agency, they have proposed to impose a ban on these tokens and have introduced a prohibition, which states that the DIFC cannot carry out any form of promotion, or public offer related to any of the tokens on this list.
This is an indication that countries all over the world are focusing on introducing regulation the crypto sector, which continues to grow and expand at a rapid pace. The United States President Joe Biden also issued an executive order this week for the purpose of outlining regulation for the crypto space, which has received a good response from the community in general. The UAE has also taken an interest in doing the same because crypto tokens are becoming widespread and the risks associated with them need to be addressed.