Dubai to reduce DFSA regulation for fintech firms with new licence
The Dubai International Financial Centre’s regulator has announced the launch of a new ‘lighter touch’ financial services licence for fintech firms, that will enable them to temporarily operate in the district with less strict regulatory requirements.
The Innovation Testing Licence will allow qualifying companies to test new concepts within the DIFC without being subject to the same regulatory requirements as normal financial services firms, the Dubai Financial Services Authority (DFSA) said in a statement announcing the move.
Instead, the authority will work with applicants to understand the business proposal and establish the appropriate control.s for the safety of any customers involved, on a “case-by-case” basis.
Ian Johnston, chief executive at the DFSA, pictured below left, said: “Fintech is changing the landscape for financial services, providing more opportunities to seek financing and increasing financial inclusion. As regulators, it is our responsibility to provide a framework which supports the sustainable development of this industry while protecting consumers and financial stability.
“Our efforts to develop a regulatory framework that promotes growth and innovation, while protecting financial stability and consumers, is part of our contribution to Dubai’s greater vision of becoming an information-based society and a smart city,” he said.
Fintech firms will be able to use the licence to test a product or service for six to 12 months, with an extension beyond this period potentially granted in “exceptional cases”.
If a firm meets the requirements detailed in the test plan and it can meet DFSA’s full requirements it will then migrate to full authorisation. If not it will be forced to cease activities in DIFC that need regulation.
DIFC has announced a number of regulatory changes in recent months in an attempt to lure more business.
The DFSA said that its approach is aligned with the National Innovation Strategy set out by UAE Vice President, Prime Minister Sheikh Mohammed Bin Rashid Al Maktoum, to create an “innovation-friendly ecosystem”. In line with the goals of the Dubai 2021 strategy, the DFSA added that is also formalising its approach to loan-based and investment-based crowdfunding platforms.
“Our efforts to develop a regulatory framework that promotes growth and innovation, while protecting financial stability and consumers, is part of our contribution to Dubai’s greater vision of becoming an information-based society and a smart city,”Johnston added:
The DFSA’s latest initiative follows the launch of the Fintech Hive at DIFC, which will bring together the next generation of leaders and entrepreneurs to compete and address the growing needs of the region’s financial services industry, using innovative technology solutions. It intends to catalyse growth and efficiency in a variety of areas including trade finance, alternative finance and Sharia-based services.
The free zone also launched a new fintech accelerator in January to provide mentorship to start-ups and entrepreneurs.