Dubai International Financial Centre (DIFC) has enacted “the world’s first Digital Assets Law” to provide legal certainty for users and investors in the rapidly evolving sector.
The new legislation came into effect on March 8, 2024, following a review of the approach taken to digital assets in multiple jurisdictions, and a period of public consultation in 2023. It applies to the DIFC free zone, and not to the wider emirate of Dubai.
Digital assets represent a trillion-dollar asset class, and include, for example, cryptocurrency and non-fungible tokens (NFTs). They present significant opportunities for innovation and investment, but questions abound across several jurisdictions as to their regulation and enforcement. International judgments across the common law world have begun to provide some clarity but have not yet provided a comprehensive legal framework.
The DIFC Law No. 2 of 2024 defines the legal characteristics of digital assets as a form of property, outlining how they can be controlled, transferred, and dealt with by interested parties.
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, DIFC has enacted a new Law of Security, replacing the 2005 law, to provide clarity in relation to taking security over digital assets.
Visser added: “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.”
It has also made amendments to select existing legislation to cater for the consequences of the new digital assets and revised security regimes. One such update includes the recognition of “electronic transferable records” to facilitate cross-border trade and allow for the automation of certain transactions through smart contracts.
