Dubai Financial Services Authority (DFSA) announcement that it has put in place a regulatory framework for investment tokens.

Reflecting the proposals outlined in a consultation paper released in March, the framework marks the first phase of the DFSA’s digital asset regime. The regulatory framework defines investment tokens as a security token or a derivative token.

The announcement more specifically defines investment tokens as “a security or derivative in the form of a cryptographically secure digital representation of rights and obligations that is issued, transferred and stored using general ledger technology distributed (DLT) or other similar technology “.

The above definition which “also confers rights and obligations which are substantially similar in nature to those conferred by a security or derivative, or has an object or effect substantially similar to a security or derivative”, was also included.

The settlement mandate

The financial authority said the regulatory framework would apply to anyone interested in marketing, issuing, trading or holding investment tokens, in relation to the Dubai International Financial Center (DIFC). It also applies to “authorized companies” seeking to offer financial services related to investment tokens. These services include the negotiation, advice and organization of transactions, as well as the management of portfolios and investment funds with investment tokens.

“Creating an ecosystem for innovative businesses to thrive in the UAE is a key priority for the governments of the UAE and Dubai, as well as the DFSA,” said Peter Smith, DFSA Managing Director, responsible for strategy, policies and risks. “Our consultation on investment tokens allowed us to understand what companies are looking for in a regulatory framework and to introduce a market-friendly regime.”

Although cryptographically secure via DLT, the ad does not define investment tokens as cryptocurrency. What the authority called “swap tokens” would be covered by new proposals, along with utility tokens and “certain asset-backed tokens (stablecoins)”. The DFSA said it would release its second consultation paper later in the fourth quarter. Dubai is said to have become one of the most cooperative environments for cryptocurrency investment.

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