On 28 September 2023, the Dubai International Financial Centre (DIFC) launched a public consultation on its new Digital Assets Law (DAL). The DAL proposal aims to provide a comprehensive framework for DIFC and changes to other key laws, including the Contract Law, Insolvency Law, Law of Obligations, Trust Law, and Foundations Law, to accommodate digital assets in the DIFC’s larger legal framework.
Digital Assets Law
According to the DIFC, the trillion-dollar asset class represented by digital assets, which includes cryptocurrencies, NFTs, stablecoins, and security tokens, offers significant room for future innovation and market growth. From a regulated financial services standpoint, the main challenge in many jurisdictions has been to regulate and apply enforcement-related consequences on some of the practical implementations of this asset class. The DIFC acknowledges that the precise nature of the legal characteristics and implications of digital assets are still up for debate. It is in this context that the DIFC is proposing a new DAL.
Key Features of the DAL
- Definition of Digital Asset – The DAL defines a digital asset as being non-duplicable, rivalrous, and existing as a notional quantity unit manifested by software and network-instantiated data. A digital asset also exists independent of any particular person and the legal system.
- Property Status – Digital assets are characterised as intangible property that are neither things in possession nor things in action. This establishes digital assets as a new “third category” of property.
- Original Acquisition of Title – Control is presumed to indicate title, linking control and ownership. Exceptions apply in certain cases like theft or lack of intention.
- Interference with a digital asset/Impairment of use – The DAL provides the circumstances under which one can sue a third party for interfering with the use of a digital asset, including intentional or reckless impairment of the use of a digital asset that causes loss.
Next Steps
The DIFC invites stakeholders to submit their consultation responses by 5 November 2023. The consultation papers are available on the DIFC Legal Database.
If you are interested in learning more about the DIFC’s consultation or require support in engaging the DIFC, please contact Dana Ramadan at dana.ramadan@accesspartnership.com or Nada Ihab at nada.ihab@accesspartnership.com.
