Dubai Financial Services Authority (DFSA) has published its crypocurrency ‘Framework for Regulating Security Tokens' for public consultation over the next 30 days.
In a statement on 29 March, the DFSA said it was "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"
Bryan Stirewalt, 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.
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 .... 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."
The proposed updating of its regulatory regime to facilitate DLT-based activities would cover the following:
- the offer of security tokens to the public, and the admission to trading of security tokens on trading facilities;
- the trading of Security Tokens; and
- 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.
Some of the key changes proposed are:
- allowing facilities that trade security tokens to have direct access members, including retail clients;
- enhanced systems and controls requirements 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.