The updated regulations now permit domestic qualified investor funds to invest in unrecognized tokens, provided the exposure does not exceed 10% of the fund’s gross asset value (GAV).
The Dubai Financial Services Authority (DFSA) has revised its crypto token regime. The regulator shared this update in a June 3 announcement, saying that it aims to use the changes to enhance the regulatory framework within its special economic zone, the Dubai International Financial Centre (DIFC).
Revised Crypto Rules for Fund Investments
According to the announcement, the regulator considered feedback from industry stakeholders. That is after it asked the public’s opinion in its Consultation Paper 153, published earlier this year. The DFSA also said it checked with global best practices before implementing the amendments.
The changes affected key areas, including funds that directly invest in crypto tokens and the recognition process for crypto tokens.
Previously, the DFSA had very strict restrictions on both domestic and foreign funds investing in recognized crypto tokens. Asset managers criticized these rules as overly stringent, particularly the limitations on external and foreign funds. Responding to this feedback, the DFSA has now relaxed these rules, enabling greater flexibility for funds investing in crypto tokens.
The updated regulations now permit domestic qualified investor funds to invest in unrecognized tokens, provided the exposure does not exceed 10% of the fund’s gross asset value (GAV). This move aims to strike a balance between fostering innovation and protecting investors.
Lower Fees and New Criteria for Token Recognition
Another major change involves the token recognition process. The DFSA previously charged a $10,000 fee per token for recognition, which many firms found too high. As a fact, firms seeking recognition for multiple tokens saw the process as prohibitive.
In response, the DFSA has now slashed the fee to $5,000 per token. Furthermore, the DFSA introduced new recognition criteria for stablecoins.
Interestingly, the regulator has emphasized that the recent changes should not be mistaken for a relaxation of its stance. Rather, it simply aims to enhance flexibility in recognizing fiat crypto tokens issued in other jurisdictions with comparable regulations.
DFSA Chief Executive Ian Johnston highlighted the regulator’s commitment to fostering innovation responsibly and transparently. “At the DFSA, we have taken a balanced approach in developing this regime and remain committed to evolving it in line with global best practices and standards,” Johnston said.
These regulatory updates signal a progressive shift in the DFSA’s approach, balancing the need for innovation with stringent regulatory oversight.
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