Dubai International Financial Centre (DIFC), the global financial center in the MENA and Southeast Asia region, has proposed to enact a Digital Assets Law, a Law of Security and related amendments to select existing legislation “to cater to the requirements of the DIFC’s proposed digital assets regime to other DIFC laws.”
The proposed legislative enactments, and amendments “to existing legislation, aim to ensure DIFC Laws keep pace with the rapid developments in international trade and financial markets arising from technological developments, and to provide legal certainty for investors in, and users of, Digital Assets.”
Digital Assets, such “as cryptocurrencies, NFTs, stablecoins and security tokens, represent a trillion-dollar asset class and the scope for future innovation and market opportunities within it are considerable.”
International legal developments and judgments “across the common law world have begun to provide some clarity in this regard but has, to date, not yet provided a comprehensive legal framework mapping out the full extent of the legal characteristics of a digital asset and how users and investors within this asset class may interact with digital assets and each other.”
Following extensive review of the legal approaches taken to digital assets in multiple jurisdictions, DIFC is now publishing for public consultation its own Digital Assets Law proposal to “provide such a comprehensive framework in DIFC.”
A great deal of innovation has taken place in secured transactions regimes internationally – “particularly since the current Law of Security was enacted in 2005.”
This includes the emergence of businesses and platforms “that enable the extension of credit in, and secured or covered by, digital asset collateral arrangements, and an increasing drive to digitise international trade.”
Following consideration of regimes in other jurisdictions and particularly UNCITRAL’s Model Law on Secured Transaction, in conjunction “with the proposed new Digital Assets Law, DIFC proposes to repeal the current Law of Security, and to significantly amend and enhance DIFC’s securities regime.”
This will align the regime “with international best practice and provide clarity in relation to taking security over digital assets.” In doing so, the DIFC also “proposes to repeal the current Financial Collateral Regulations and amalgamate the financial collateral provisions into a new chapter of the proposed new Law of Security.”
Consultation period
The proposed legislative changes contained “in Consultation Papers No. 4 and No. 5 of 2023 have been posted for an extended 40-day public consultation period with the deadline for providing comments ending on 5 November 2023. The Consultation Papers are available on the DIFC Legal Database.”