Dubai’s financial regulator has published a framework to regulate the use security tokens as technology continues to play an increasingly important role in the financial sector.
The Dubai Financial Services Authority (DFSA) said it has put out the framework for public consultation for a period of 30 days.
The DFSA said it is actively engaged with key stakeholders in Dubai and around the world on the future of finance and the rapidly growing area of financial technology, including various Distributed Ledger Technology (DLT) applications.
Security tokens are essentially digital, liquid contracts for fractions of any asset that already has value, like real estate, a car, or corporate stock. Using security tokens means investors can expect that their ownership stake is preserved on the blockchain ledger.
The framework goes beyond typical securities to also cover derivatives. This enables the use of DLT and similar technologies across the full spectrum of investments in a consistent manner, the DFSA added.
Some of the key changes proposed are allowing facilities that trade security tokens to have direct access members, including retail clients; enhanced systems and controls requirements to address risks associated with the use of DLT or similar technology; enhanced disclosure in prospectuses and enhanced requirements for those providing custody of digital wallets.
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