backOn 1 October 2025, the Dubai Financial Services Authority (“DFSA”) – the financial regulatory agency of the special economic zone, the Dubai International Financial Centre (“DIFC”) – published a consultation paper (CP 168) on proposed amendments to the regulatory regime for providing financial services in respect of Crypto Tokens. The changes will remodel the existing centralised regime of Recognised Crypto Tokens and will instead place responsibility on individual firms to monitor the suitability of the Crypto Tokens they use. It is important to note that the regulation of “Fiat” stablecoins will not be impacted by this proposal.
Background
In early 2022, the DFSA published a consultation paper on the regulation of cryptoassets and implemented the first set of comprehensive rules on the subject matter in November of that year. The rules covered a lot of conduct related areas, including governance, AML, market abuse and relevant disclosures. Having seen subsequent waves of additional regulatory changes over the years, the DFSA is revisiting the topic again, this time with a focus on abolishing the centralised “suitability assessment” of Crypto Tokens (other than stablecoins) and re-allocating regulatory responsibility directly on firms. The regulator has stated that the proposed changes are intended to reflect global tendencies and feedback from the market on the operation of the existing regime, with the aim of bringing additional flexibility and innovation to support market growth while maintaining consumer confidence and international standards.
Consultation Paper
Currently, under GEN Rule 3A.2.1(1), regulated activities listed therein can only be carried out using Crypto Tokens if they are a “Recognised Crypto Token” as determined by the DFSA. In its assessment of whether currencies can be included in the list of Recognised Crypto Tokens, the regulator looks at several factors, including the regulatory status of the Crypto Token in other jurisdictions, transparency concerns, size, liquidity and volatility of the token’s current market, the adequacy of the technology used, and whether risks (if any) are reasonably mitigated. Under the regime currently in force, prospective applicants can submit an application to the DFSA, pay the requisite fee and following a positive determination, their coins become “Recognised”. Most well-known cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC) have been recognised since November 20221Dubai Financial Services Authority, ‘Notice of Initial List of Recognised Crypto Tokens’ (DFSA, 1 November 2022). , as part of the first wave of crypto regulation in the jurisdiction. More recently, in June 2025, Ripple (RLUSD) was also added to the list of Recognised Crypto Tokens.2Dubai Financial Services Authority, ‘Notice of Crypto Token Recognition: Ripple (RLUSD)’ (DFSA, 3 June 2025).
By contrast, under the proposed new regime, firms intending to use a Crypto Token will be required to undertake the “suitability” assessment by way of internal processes, taking into account the criteria listed in GEN Rule 3A.2.1(3), which largely mirror the factors discussed above. Following their assessment, they should be able to conclude, on reasonable grounds, that a Crypto Token is suitable in relation to a particular activity. Upon request, firms should be able to produce evidence to the DFSA demonstrating why a Crypto Token was deemed suitable.
Relatedly, it was proposed that firms be required to submit a monthly report (a “monthly Crypto Token information return”) which should include the following information:
- a list of all Crypto Tokens deemed suitable;
- the activities undertaken in relation to them;
- Crypto Tokens that were previously deemed suitable but are now unsuitable; and
- volumes, transaction size, numbers of clients, and types of activities being undertaken in relation to suitable Crypto Tokens.
Whilst this is a positive development and is in line with changes proposed in the Abu Dhabi Global Market (“ADGM”), the process will shift the responsibility onto firms which will be required to properly assess, document and monitor Crypto Tokens deemed “suitable”. If such firms are suspected of skirting the new rules or involved in scandals they will be closely scrutinised by the DFSA. The application and enforcement of the new regime will be a market tendency worth following given the slew of recent misconduct by crypto firms. Notable examples include FTX’ embezzlement scheme, systemic regulatory failures by Binance amassing over $4bn in losses, or even the “pump-and-dump” scheme in relation to $LIBRA, the cryptocurrency promoted by Argentina’s president Milei as part of economic reforms in the country.
Changes related to funds’ activities
The DFSA also proposes to remove the restrictions on Collective Investment Funds (“CIFs”) to directly or indirectly invest in Crypto Tokens. Currently, DIFC-based fund managers cannot manage foreign funds that invest in Crypto Tokens. It is proposed that this restriction no longer apply to CIFs, although the DFSA has specifically encouraged feedback to be provided on this particular proposal.
Another change concerns Authorised Firms – those holding a licence to provide a regulated activity in the DIFC – which are currently under an obligation to provide a Key Features Document (“KFD”) when offering crypto-related financial services. The KFD includes information about the Crypto Token such as the issuer, technology used, and potential risks – all aimed at helping clients make informed decisions about dealings with a Crypto Token. Going forward, this will no longer be required in relation to arranging or providing custody because, as noted by the DFSA, the KFD is more suitable for investors as opposed to those looking for a custody provider. This proposal once again illustrates DFSA’s commitment to streamlining compliance and ensuring the regulatory regime remains unnecessarily burdensome.
Transitional Rules and Next Steps
The DFSA has stated that from the point at which the new rules come into force, Recognised Crypto Tokens under the current centralised regime will be deemed suitable for a period of 3 months. After this time, firms will need to conduct suitability assessments under the new regime. Additionally, if a person becomes aware of a significant development which suggests that the Crypto Token would no longer meet the suitability criteria, they need to cease dealing in it.
The DFSA will welcome responses to the CP until 31 October 2025.