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DIFC passes Digital Assets Law, enhances security regulations

The new law delves into their legal characteristics as a form of property, outlining how they can be controlled, transferred, and managed.

DIFC passes Digital Assets Law, enhances security regulations
[Source photo: Krishna Prasad/Fast Company Middle East]

The Dubai International Financial Centre (DIFC) is positioning itself as a key player in the digital asset sector, attracting businesses and investors seeking a legally secure environment for their digital ventures.

The introduction of the world’s first comprehensive Digital Assets Law by the Dubai International Financial Centre (DIFC) marks a significant milestone. This legislation provides clear legal frameworks for digital assets, including their recognition as collateral, setting a new standard in the digital asset sector.

The DIFC’s proactive approach, including an exhaustive review of regulations in other jurisdictions and a comprehensive public consultation in 2023, highlights its commitment to staying ahead in the digital asset sector. This step ensures a legally certain environment for investors and users of digital assets within its free zone.

The new law outlines the legal characteristics of digital assets as a form of property, detailing how they can be controlled, transferred, and managed. Additionally, existing DIFC laws, such as the Contracts Law and Trust Law, have been updated through Amendment Law No. 3 of 2024 to address specific issues related to this new asset class.

In addition to addressing digital assets, the DIFC has integrated provisions for using electronic transferable records. These digital equivalents of traditional paper documents, such as bills of lading, will enhance cross-border transactions by enabling faster and more secure transmission. They will also facilitate automation through smart contracts, streamlining processes and reducing administrative burdens.

The enactment of the Digital Assets Law aligns with an update to DIFC’s Law of Security, replacing the 2005 version. This update reflects global advancements in secured transactions, particularly in response to platforms offering credit backed by digital assets. Inspired by the UNCITRAL Model Law on Secured Transactions, the new law integrates financial collateral regulations into a unified framework, ensuring alignment with international best practices.

“We consider this legislation to be groundbreaking as the first legislative enactment to comprehensively set out the legal characteristics of digital assets as a matter of property law, and to provide for how digital assets may be controlled, transferred and dealt with by interested parties,” said Jacques Visser, Chief Legal Officer at DIFC Authority.

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