The Dubai International Financial Centre (DIFC), the regulatory arm of the United Arab Emirates’ special economic zone, has released a consultation document describing its proposed regulatory framework for crypto tokens.
The Legislative Draft
The public has time till May 6, 2022, to comment on the DFSA’s proposal “for a regulatory regime for individuals intending to perform financial services activities in respect of crypto tokens,” according to the regulatory body.
After the completion of the public input period, the DFSA will make modifications to the proposed legislation that it deems necessary. The excerpts from the paper:
We will determine which changes to the proposed regime are necessary following the public consultation and modify the draft legislation accordingly. For approval, His Highness the President of the DIFC will submit the amended Regulatory Law and Markets Law, followed by His Highness the Ruler of Dubai.
A final version of the laws and rulebook modules will be published on the DFSA’s website.
According to the regulatory agency, interested parties should not act on the proposals until relevant changes have been made.
Tokens Prohibited or Excluded:
Meanwhile, the DFSA highlighted in its consultation document that the most recent suggestions only apply to crypto tokens, not investment tokens. Investment tokens, formerly known as security tokens, are addressed in a separate consultation document, according to the regulatory body.
In addition, the most recent consultation document distinguishes between crypto tokens and restricted and excluded tokens. Excluded tokens, according to the DFSA, are utility tokens, which are “a form of token having a specified use case within a restricted ecosystem.” Non-fungible tokens (NFTs) and Central Bank Digital Currencies (CBDCs) are also on the DFSA’s “excluded tokens” list.
The DFSA’s consultation document lists privacy tokens and devices, as well as algorithmic tokens, as forbidden tokens. The regulatory body has proposed to “ban these tokens and implement a prohibition that no public selling or marketing” of any such tokens shall take place “in or from the DIFC,” according to the regulatory body.
