DFSA Consultation on Enhancing Crypto Token Regulation

The Riffle

The Dubai Financial Services Authority (DFSA) has released Consultation Paper No. 168, setting out significant enhancements to the regulatory regime for Crypto Tokens within the Dubai International Financial Centre (DIFC). The proposals, dated 1 October 2025, are designed to align with global standards, address supervisory lessons, and support responsible innovation in the digital assets sector.

Core Proposal: Firm-Led Suitability Assessments

At the heart of CP168 is a fundamental shift: moving away from the DFSA’s centralized “recognition” process for Crypto Tokens to a firm-led suitability assessment model.

• What changes?

  Instead of the DFSA maintaining a list of “Recognised Crypto Tokens,” the responsibility will now rest with individual firms. Each Authorised Firm must determine, on reasonable grounds, whether a Crypto Token is suitable for a specific financial service or activity.

• Assessment criteria include:

  • Transparency of token purpose, governance, and founders.

  • Regulatory treatment in other jurisdictions.

  • Market size, liquidity, and trading history.

  • Underlying technology.

  • Compliance with DFSA-administered legislation.

• Firm obligations:

  • Publish a list of tokens deemed suitable on their website.

  • Continuously monitor and review suitability.

  • Retain detailed records of all assessments.

Importantly, Privacy Tokens, Privacy Devices, and Algorithmic Tokens remain prohibited in the DIFC .

Stablecoins: DFSA Retains Control

While responsibility shifts to firms for most tokens, Fiat Crypto Tokens (stablecoins) remain under DFSA’s direct oversight due to their systemic implications.

The DFSA will:

• Continue to determine which stablecoins are suitable for use in the DIFC.

• Publish a Policy Statement outlining its assessment criteria.

• Maintain an official list of approved stablecoins .

Funds & Investments: More Flexibility

The paper proposes liberalizing rules for collective investment funds:

• Removal of thresholds and restrictions for Domestic, External, and Foreign Funds investing in Crypto Tokens.

• Funds tracking mainstream indices (e.g., S&P 500) will no longer be considered “crypto funds” merely because of incidental crypto exposure.

• Funds can only invest in stablecoins approved by the DFSA.

This change addresses long-standing concerns from fund managers about overly restrictive rules .

Business Conduct & Client Rules: Simplified

The DFSA also suggests easing certain business conduct requirements:

• Key Features Document (KFD): Custody providers will no longer need to issue a KFD, as disclosures are already covered elsewhere.

• Client classification: Crypto Tokens will now count fully toward the Net Asset Test for qualifying as an Assessed Professional Client (removing the earlier 33% limit).

• Other adjustments: The concept of “Recognised Jurisdictions” and application fees for token recognition will be removed .

Reporting & Enforcement

With greater flexibility comes stricter reporting:

• Firms must file a monthly Crypto Token Information Return with the DFSA, covering suitable tokens, activities, and transaction data.

• Non-compliance will fall under the Fixed Penalty Notice regime .

Transitional Provisions

To ensure a smooth rollout:

• Current “Recognised Crypto Tokens” will remain valid for three months under the new framework.

• Firms wishing to continue using them beyond that must conduct their own suitability assessments.

• The DFSA will remove the existing recognised list from its website after the transition period .

Why This Matters

CP168 marks a paradigm shift in how crypto is regulated in the DIFC. By moving responsibility onto firms, the DFSA is fostering a regime that is both flexible and accountable, mirroring global regulatory trends.

For businesses, this means more autonomy — but also greater responsibility. For investors, it means broader access to funds and products — but with safeguards that reflect global best practices.

Read the full briefing document presented by 10 Leaves here -