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Dubai: DFSA launches consultation on proposed Regulation of Security Tokens

The Dubai Financial Services Authority ('DFSA') published, on 29 March 2021, its Framework for Regulating Security Tokens for public consultation. In particular, the DFSA announced that it is actively engaged with key stakeholders in Dubai and globally on the rapidly growing area of financial technology, including various Distributed Ledger Technology ('DLT') applications. Furthermore, the framework proposes updating the regulatory regime to facilitate DLT-based activities to provide, among other things, enhanced systems and controls requirements to address associated risks and enhanced requirements for those providing custody of digital wallets.

More specifically, the DFSA highlighted that allowing facilities that trade Security Tokens to have direct access members, including retail clients, is a significant shift form the current intermediated model of trading in markets. To this end, the DFSA noted that the proposals include appropriate safeguards to tackle investor protection needs and misconduct risks, whilst also addressing market integrity, financial stability, and money laundering and terrorism financing threats in the direct access environment. Lastly, the DFSA noted that it will soon issue proposals for other types of tokens, such as exchange tokens and utility tokens, later in 2021.

You can read the press release here.