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As part of our ongoing series on key legal developments of the
financial services sector in the United Arab Emirates, this summary
presents an overview on the current Crypto Token regime of the
Dubai Financial Services Authority
(“DFSA“). Mayer Brown’s Middle East
practice is closely monitoring important developments of the
financial services sector in the region.
By way of background, on November 1, 2022, the DFSA established
its long-awaited Crypto Token regime (the
“Regime“) following the publishing of
DFSA’s Consultation Paper No. 143 in March 2022, proposing to
allow for the provision of financial services in relation to Crypto
Tokens in and from the Dubai International Financial Centre
(“DIFC“). The new Regime supplements the
DFSA’s existing Investment Tokens regime that was introduced on
October 25, 2021.
The Regime expanded the scope of several existing financial
service activities, such as advising, dealing, arranging, trading
and custody, to allow entities in the DIFC to provide products and
services related to Crypto Tokens. Following the implementation of
the Regime, an entity that wishes to carry out certain activities
in or from the DIFC in relation to Crypto Token financial services
will require DFSA’s prior authorization.
Article GEN (A2.5) of the DFSA Rulebook relating to the Crypto
Token definition provides that a Token is considered a
“Crypto Token” if (i) it is used, or is
intended to be used, as a medium of exchange or for payment or
investment purposes or (ii) it confers a right or interest in such
a Token.
A Token is not considered a Crypto Token if (i) it is an
Investment Token (i.e., a security token or derivative token) or
(ii) an Excluded Token (such as non-fungible tokens, utility tokens
or digital currencies issued by government authorities/central
bank).
The DFSA Rulebook defines a “Token“
as a cryptographically secured digital representation of value,
rights or obligations that may be issued, transferred and stored
electronically using DLT or other similar technology.
Generally speaking, only Crypto Tokens that are recognized by
the DFSA must be used in connection with a financial service,
public offering or financial promotion in the DIFC (the
“Recognized Crypto Tokens“). A list of
Recognized Crypto Tokens will be regularly updated by the DFSA when
the DFSA is expected to publish notices when it further recognizes
Crypto Tokens (i.e., issues updates to the Recognized Crypto Tokens
list) after an application for recognition has been made by a
current or applicant authorized person or an issuer or developer of
the Crypto Token.
The following chart, provided in Article GEN (A2.5) of the DFSA
Rulebook, summarizes the different classifications of Tokens:
|
Investment Tokens
|
Crypto Tokens
|
Excluded Tokens
|
||
|
|
Unrecognized Tokens
|
Recognized Tokens
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Prohibited Token:
|
|
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Financial Services can be carried on in the DIFC, subject to
|
Financial Services can be carried on in the DIFC, subject to
|
Financial Services cannot be carried on in the DIFC unless and
|
Prohibited from being used in the DIFC.
|
Use not regulated in the DIFC except: • Some issuers or
|
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This
Mayer Brown article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein.
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