Friday 31 March 2023 - 11:27:08 am

Dubai Financial Services Authority consults on regulation of Security Tokens

DUBAI, 29th March, 2021 (WAM) -- The Dubai Financial Services Authority (DFSA) today published its "Framework for Regulating Security Tokens" for public consultation for a period of 30 days.

The DFSA is proposing a comprehensive and innovative regulatory framework for regulating Security Tokens, a new and growing area of interest for many industry participants. DFSA is 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.

Security Tokens create rights and obligations that are the same as, or are substantially similar to conventional investment instruments.

The term Security Tokens is used as this is a commonly used term in the industry, but the framework goes beyond typical securities to cover derivatives as well. This enables the use of DLT and similar technologies across the full spectrum of investments in a consistent manner.

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.

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.

He added that the DFSA 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."


WAM/Esraa Ismail/Rola Alghoul