DIFC announces consultation on new Digital Asset Law

Dubai International Financial Center (DIFC)the leading global financial center in the Middle East, Africa and South Asia (MEASA) region, has proposed to implement a first-of-its-kind initiative. Digital Asset Lawa new security law and related amendments to select existing legislation to satisfy the requirements of the DIFC’s proposed digital assets regime for other DIFC laws.

The proposed legislative enactments and amendments to existing legislation aim to ensure that the DIFC Laws keep pace with the rapid developments in international trade and financial markets arising from technological developments, and to provide legal certainty to investors and users. of Digital Assets.

Jacques Visser, legal director of DIFCcommented:

“The DIFC is pleased to announce a new proposed Digital Assets Law and a new Security Law regime. DIFC has been working closely with experts in the field of digital assets and banking and finance to create an innovative and comprehensive Digital Assets Law, and in doing so proposes a significantly improved and updated Security Law regime. The proposed Digital Asset Law establishes the legal characteristics of a digital asset, its proprietary nature and how interested parties can control, transfer and treat it. The proposed new Collateral Law is based on the UNICTRIAL Model on Movable Transactions and has been adapted to take into account specific factors related to the DIFC. “We believe these proposals will put the DIFC’s legal and regulatory framework at the forefront of international best practice.”

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 them is considerable. Until now, the primary focus in many jurisdictions has been on regulating and imposing sanctions related to some of the practical applications of this asset class from a regulated financial services perspective. However, the fundamental benefits of blockchain technology, the digital assets that can be created with it, and its application across a broad spectrum of use cases will grow and become increasingly important in a much broader context. In this regard, broader legal questions about the exact nature of the legal characteristics and impact of digital assets remain open to debate on several key issues. International legal developments and rulings across the common law world have begun to provide some clarity in this regard, but to date have not yet provided a comprehensive legal framework outlining the full scope of the legal characteristics of a digital asset. and how users and investors can do it. Within this asset class they can interact with digital assets and each other.

Following a thorough review of the legal approaches adopted for digital assets in multiple jurisdictions, DIFC is now publishing for public consultation its own proposed Digital Assets Law to provide such a comprehensive framework in DIFC. In addition, the legislative proposal also proposes changes to other key laws of the DIFC, including the Contract Law, the Insolvency Law, the Obligations Law, the Trust Law and the Foundation Law to meet the requirements of digital assets in the broader legal framework. of the DIFC.

Security Law – Consultation Document No. 5 of 2023

Similarly, there has been a great deal of innovation in secured transactions regimes internationally, particularly since the current Guarantees Law was enacted in 2005. This includes the emergence of businesses and platforms that enable the extension of credit in, and guaranteed or covered by, digital asset collateral arrangements and a growing push to digitize international trade.

Following consideration of regimes in other jurisdictions and, in particular, the UNCITRAL Model Law on Secured Transactions, together with the proposed new Digital Assets Law, the DIFC proposes to repeal the current Security Law and significantly modify and improve the regime of DIFC securities. This will align the regime with international best practice and provide clarity in relation to the security of digital assets. In doing so, the DIFC also proposes to repeal the current Financial Guarantee Regulations and merge the financial guarantee provisions into a new chapter of the proposed new Security Law.

Consultation period

The proposed legislative changes contained in Consultation Documents No. 4 and No. 5 of 2023 have been published for an extended public consultation period of 40 days and the deadline to provide comments is 5 November 2023. The consultation documents are available on the DIFC legal database.

The proposed amendments reflect the Centre’s commitment to maintaining a transparent and robust legal and regulatory framework aligned with global best practices.

News source: Emirates News Agency