Dubai’s Crypto Rules Just Got a Major Upgrade

• DFSA updates crypto token regime, allowing investment in both recognized and unrecognized crypto tokens.
• New regulations cover custody, staking, financial crime compliance, transaction monitoring, and stablecoin criteria.
• Amendments align with international standards, reflecting IOSCO and Basel Committee guidelines on crypto assets and DeFi.

Chainalysis reported on Twitter that the Dubai Financial Services Authority (DFSA) has significantly revised its crypto token regulations following a consultation launched in January 2024. This update marks a major advancement in the regulatory framework for cryptocurrencies within the Dubai International Financial Center (DIFC).

1/7 On 3 June 2024, the Dubai Financial Services Authority (DFSA) amended its Crypto Token Regime following its consultation published in January 2024. What should industry players note?

— Chainalysis (@chainalysis)
June 11, 2024

The DFSA has introduced several key amendments aimed at fostering innovation and enhancing regulatory clarity. One major change authorizes the offering of Units of External and Foreign Funds that invest in recognized crypto tokens. Additionally, Domestic Qualified Investor Funds are now permitted to invest in unrecognized crypto tokens, expanding investment opportunities within the region.

Custody and staking of crypto tokens are also addressed in the new regulations. The new regulations provide detailed guidelines on the custody of crypto tokens, ensuring secure storage and management. Staking, a process where holders participate in network operations and earn rewards, is now more clearly regulated to foster transparency and security in these activities.

Moreover, the DFSA has bolstered its financial crime compliance framework. The updated regime includes enhanced guidance on the “travel rule,” which requires information sharing between financial institutions during transactions. This move aims to prevent illicit activities and ensure compliance with international standards.

These changes reflect recent developments that happened in the market and incorporate suggestions from international standard-setters. The DFSA has introduced stringent requirements for continuous transaction monitoring and analysis to detect and prevent fraudulent activities.

The Basel Committee and the International Organization of Securities Commissions (IOSCO) have both released guidelines that the DFSA has taken into account while updating its regulations.

Ian Johnston, the DFSA’s chief executive, emphasized the importance of these changes. According to him, the DFSA seeks to accomplish regulatory goals while fostering innovation in a responsible and open manner. The DFSA’s commitment to updating its regulations in accordance with international best practices is demonstrated by the balanced approach used in the development of this regime.

Over the past two years, the DFSA has interacted with over 100 companies seeking to obtain a license within the DIFC. This engagement provided valuable insights into market dynamics and regulatory needs, informing the recent changes to the crypto token regime.

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