The Dubai Financial Services Authority (DFSA) issued a consultation paper(pdf) proposing major changes to its crypto token regime, shifting responsibility for determining which tokens are suitable away from the regulator and onto firms. Public comments are open until 31 October.

IN CONTEXT- Currently, only DFSA-recognized tokens — such as BTC, ETH, and LTC — can be used in financial services from the Dubai International Financial Center (DIFC).

Suitability test moves to market players: Under the new proposals, firms would be required to conduct their own suitability assessments against criteria including liquidity, governance, and technology. They would need to publish a list of approved tokens on their websites, monitor them on an ongoing basis, and halt activities if a token falls short.

Stablecoins remain under DFSA watch: Fiat-backed tokens will remain subject to DFSA review, reflecting systemic and AML risks flagged by international bodies. A forthcoming policy statement will set out the regulator’s assessment criteria and publish a list of approved stablecoins.

New reporting duty: Firms would also need to file monthly returns on crypto token activity, covering their lists of suitable tokens, trading volumes, and client exposure. Late filings would trigger fixed penalties.

Funds get more leeway: The DFSA is proposing to remove thresholds and restrictions on how much DIFC, external, or foreign funds can invest in crypto. Fund managers would be able to market or manage funds investing directly or indirectly in tokens, provided they carry out suitability assessments and maintain custody and disclosure safeguards.

Other easing measures: The regulator is also proposing technical changes to lighten compliance, including:

  • Scrapping the concept of recognized jurisdictions for crypto oversight;
  • Getting rid of the need to provide a key fact document for tokens;
  • Allowing all crypto assets to count toward professional investor thresholds;
  • Removing application fees for token recognition.

Transition period: Tokens currently on the DFSA’s recognized list will remain deemed suitable for three months once the new rules take effect. After that, firms must have completed their own assessments. The DFSA will then remove its recognized token list entirely.

ICYMI- The ADGM’s Financial Services Regulatory Authority is simultaneously advancing its own crypto agenda, launching a consultation earlier this week on new rules for staking virtual assets.

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