Dubai: Dubai’s Financial Services Authority is taking feedback on its proposed regulations for cryptocurrency tokens. Submissions can be provided over the next 30 days.
The Authority has brought out its ‘Framework for Regulating Security Tokens’, which has emerged as a “new and growing area of interest for many industry participants,” DFSA said in a statement. “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.”
“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,” said Bryan Stirewalt, Chief Executive of DFSA. “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.”
DFSA will also issue proposals for other types of tokens, such as exchange tokens and utility tokens, later in the year.
Scope of the change
The intent is to update the regulatory regime to facilitate DLT-based activities in:
• Offer of security tokens to the public and admission to trading of these on trading facilities;
• Trading in security tokens; and
• 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 include safeguards to tackle investor protection needs and misconduct risks, while addressing market integrity, financial stability and, crucially, money laundering and terrorism financing threats in the direct access environment.
The proposed changes extend to:
• Allowing facilities that trade Security Tokens to have direct access members, including retail clients;
• Enhanced systems and controls to address risks associated with the use of DLT or similar technology;
• Enhanced disclosure in prospectuses; and
• Enhanced requirements for those providing custody of digital wallets.