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The Dubai International Financial Centre (DIFC) has unveiled a proposal to introduce a new law aimed at regulating digital assets, aligning with the fast-paced developments in financial markets.
The proposed Digital Assets Law outlines a legal framework for the control, transfer, and management of virtual assets such as cryptocurrencies, NFTs, stablecoins, and security coins.
Additionally, DIFC has introduced another legislative proposal called the Law of Security, which draws inspiration from the UNICTRIAL Model on Secured Transactions and has been adapted to cater to specific factors concerning DIFC.
Jacques Visser, Chief Legal Officer at DIFC, commented on the initiative, saying, “DIFC has been collaborating closely with experts in the digital assets and banking and finance sectors to craft a pioneering, globally relevant Digital Assets Law. In doing so, we propose a considerably enhanced and modernized Law of Security regime.”
Virtual assets represent a trillion-dollar industry that continues to witness growth and evolution. In 2021, the global cryptocurrency market’s value surged to approximately $2 trillion, a significant increase from $100 billion just three years prior, as reported by CoinMarketCap.
Furthermore, in 2021, companies conducted over 2 billion transactions, totaling $1.4 trillion in virtual currency activities, marking a substantial rise from the $193 billion recorded in 2020, according to the Office of Financial Research in the United States.
The DIFC noted that, thus far, no comprehensive legal framework has been established to outline the full extent of the legal attributes of digital assets and how users and investors in this asset class can engage with digital assets and one another. Many jurisdictions have attempted to regulate and impose controls on practical applications of virtual assets from a regulated financial services standpoint.
However, the DIFC emphasized that blockchain technology’s fundamental advantages, the digital assets it can create, and their broad range of applications will continue to expand in significance across various contexts. This prompts broader legal inquiries regarding the precise nature of the legal aspects and impact of digital assets, raising several critical questions.
The DIFC has released its proposals in Consultation Papers No. 4 and No. 5 of 2023, inviting the public to participate in a 40-day consultation period. Comments and feedback can be submitted until November 5, 2023, and the consultation papers are accessible on the DIFC Legal Database.
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