On 29 March, the Dubai Financial Services Authority (DFSA) published its “Framework for Regulating Security Tokens”. It has allowed the framework to undergo for public opinion for a period of 30 days.
As the press release mentions:
The Dubai Financial Services Authority (DFSA) today published its “Framework for Regulating Security Tokens” for public consultation for a period of 30 days.
The DFSA is “proposing a comprehensive and innovative regulatory framework for regulating Security Tokens, a new and growing area of interest for many industry participants.” The authority is actively working on innovative areas of financial technology, engaging with key stakeholders in Dubai and other regions.
In its press release, DFSA mentioned:
We are actively engaged with key stakeholders in Dubai and around the world on the future of finance and the rapidly growing area of financial technology, including various Distributed Ledger Technology (DLT) applications.
DFSA is proposing to update the regulatory regime to facilitate DLT-based activities, offering Security Tokens to the public, trading facilities of Security Tokens; the provision of other financial services relating to Security Tokens, such as providing custody relating to Digital Wallets holding Security Tokens, and advising and arranging.
The proposals are designed in such a way as “to tackle investor protection needs and misconduct risks, whilst also addressing market integrity, financial stability and, crucially, money laundering and terrorism financing threats in the direct access environment.” DFSA also announced that “it will soon issue proposals for other types of tokens that are not Security Tokens, such as exchange tokens and utility tokens, later in 2021.”
Bryan Stirewalt, the Chief Executive of the DFSA, said:
The proposal for regulation of Security Tokens is a key milestone in paving a clear and certain path for those issuers who wish to raise capital in or from the DIFC using DLT and similar technology, and for those firms who intend to be involved in this market, by conducting or providing financial services. Our proposals promote and facilitate innovation, while also protecting consumers, addressing market integrity and mitigating ML/FT and other risks. We have drawn on the experience of other regulators who have taken cautious steps in this rapidly developing area, while addressing DIFC specific needs. We look forward to receiving public comments on these proposals.