Dubai, UAE: Dubai International Financial Centre (DIFC), the leading global financial centre in the Middle East, Africa and South Asia (MEASA) region, enacts the world’s first Digital Assets Law, a new Law of Security and related amendments to select existing legislation to cater for the consequences of the new digital assets regime and revised security regime. The legislative enactments 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 Law – DIFC Law No. 2 of 2024
Digital Assets represent a trillion-dollar asset class and the scope for future innovation and market opportunities within it are considerable. Thus far, the primary focus in many jurisdictions has been to regulate and impose enforcement related sanctions on some of the practical applications of this asset class from a regulated financial services perspective. However, the fundamental benefits brought about by blockchain technology, the digital assets that can be created thereby, and their application across a wide spectrum of use cases will grow and become of increasing importance in a much wider context. In this regard, the broader legal questions as to the exact nature of the legal features and consequences of digital assets has very much remained open for debate on a number of key issues. International legal developments and judgments across the common law world have begun to provide some clarity in this regard but have 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, and a period of public consultation in 2023, DIFC is now enacting its own Digital Assets Law.
Existing DIFC laws such as the Contracts Law, Law of Obligations, Law of Security, Law of Damages and Remedies, Trust Law and Foundations Law have also been updated through DIFC Amendment Law, No. 3 of 2024, to cater to specific issues arising in relation to this asset class.
Electronic Transferable Records
Updates to the Law of Obligations also provide for the use of electronic transferable records. Electronic transferable records are functionally equivalent to paper trade documents or instruments such as bills of lading, bills of exchange, promissory notes and warehouse receipts. Recognition of such documents in electronic form facilitates greater efficiencies within cross-border digital trade by increasing the speed and security of transmission of documentation and allowing for the automation of certain transactions through smart contracts.
Law of Security – DIFC Law No. 4 of 2024
Similarly, a great deal of innovation has taken place in secured transactions regimes internationally – particularly since the DIFC 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, in particular, UNCITRAL’s Model Law on Secured Transaction, in conjunction with the new Digital Assets Law, DIFC is repealing the 2005 Law of Security, and replacing it with a new Law of Security 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, DIFC is also repealing the Financial Collateral Regulations, amalgamating the financial collateral provisions into a new chapter of the new Law of Security.
Jacques Visser, Chief Legal Officer at DIFC Authority, said: “DIFC is excited to announce the enactment of its Digital Assets Law. 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. At the same time, we are also enacting a new Law of Security, replacing the 2005 law. The revised regime is modelled on the UNCITRAL Model of Secured Transactions and significantly enhances DIFC’s securities regime to keep pace with international developments in this field and to ensure DIFC remains at the forefront of best practice.”
Enactment
The new legislation came into effect on 8 March 2024 and can be accessed via DIFC’s Legislative Database: here.
The new laws reflect the Centre’s commitment to maintaining a transparent and robust legal and regulatory framework aligned with global best practice.
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About Dubai International Financial Centre
Dubai International Financial Centre (DIFC) is one of the world’s most advanced financial centres, and the leading financial hub for the Middle East, Africa and South Asia (MEASA), which comprises 72 countries with an approximate population of 3bn and an estimated GDP of USD 8trn.
With a 20-year track record of facilitating trade and investment flows across the MEASA region, the Centre connects these fast-growing markets with the economies of Asia, Europe and the Americas through Dubai.
DIFC is home to an internationally recognised, independent regulator and a proven judicial system with an English common law framework, as well as the region’s largest financial ecosystem of over 41,500 professionals working across over 5,500 active registered companies – making up the largest and most diverse pool of industry talent in the region.
The Centre’s vision is to drive the future of finance through cutting-edge technology, innovation, and partnerships. Today, it is the global future of finance and innovation hub offering one of the region’s most comprehensive FinTech and venture capital environments, including cost-effective licensing solutions, fit-for-purpose regulation, innovative accelerator programmes, and funding for growth-stage start-ups.
Comprising a variety of world-renowned retail and dining venues, a dynamic art and culture scene, residential apartments, hotels and public spaces, DIFC continues to be one of Dubai’s most sought-after business and lifestyle destinations.
For further information, please visit our website: difc.ae, or follow us on LinkedIn and X @DIFC.
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ASDA’A BCW
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Rasha Mezher | Dubai International Financial Centre Authority
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