The DFSA's New Crypto Regime: Evolution In The Regulation Of Crypto Tokens Within The DIFC

Key Takeaways

• DFSA has introduced a Suitable Crypto Token regime, requiring Authorised Firms to assess the suitability of Crypto Tokens before engaging in certain regulated activities involving them.¹
• Fiat Crypto Tokens remain subject to the DFSA's assessment framework, meaning their suitability continues to be determined by the regulator.²
• The Conduct Principles will now apply not only to Authorised Persons but also to Employees performing a Licensed Function and other specified activities within Authorised Firms.³
• Amendments to the Collective Investment Rules remove previous restrictions on funds investing in Crypto Tokens, allowing Fund Managers to manage Domestic Funds, External Funds, and Foreign Funds regardless of whether those funds invest in Crypto Tokens.4

Introduction

The DFSA has implemented amendments to the regulatory framework governing Crypto Tokens in the DIFC. According to the DFSA, the objective of the reforms is to provide clarity for market participants and support the development of a transparent and well-regulated digital assets environment in line with developments in capital markets and evolving regulatory treatment of crypto assets globally.

The amendments affect several modules of the DFSA Rulebook, including:

• The General Module ("GEN")
• The Conduct of Business Module ("COB")
• The Collective Investment Rules ("CIR")
• The Fee Module
• The Authorised Market Institutions Module ("AMI")
• The Markets Rules Module ("MR")
• The Glossary Module

Most amendments came into force on 12 January 2026, with additional provisions relating to Conduct Principles and Authorised Individuals scheduled to take effect later in 2026.

Amendments to the General Module (GEN)

The most significant regulatory changes appear in the General Module, which clarifies the regulatory treatment of Crypto Tokens as Financial Products, meaning that the general prohibitions against misconduct under the Regulatory Law DIFC Law No. 1 of 2004 (as amended) ("Regulatory Law") apply to activities involving such tokens.5

The amendments also ensure that the Financial Promotion provisions in GEN Chapter 3 apply to Crypto Tokens and revise the Transitional Rules in Chapter 10 to support the transition to the new regime.6 However, the most substantive reform is the introduction of Chapter 3A of Crypto Token Requirements.

Introduction of the Suitable Crypto Token Regime

Chapter 3A introduces the concept of a suitable Crypto Token, replacing the earlier framework based on recognised Crypto Tokens.7 Under the previous regime, firms providing financial services involving Crypto Tokens were generally required to use tokens that had been recognised by the DFSA. Under the revised framework, Authorised Firms must conduct a suitability assessment before undertaking certain activities involving a Crypto Token, unless the token is a Fiat Crypto Token, which remains assessed by the DFSA.8

Rule GEN 3A.2.1(2) identifies several factors that must be considered when assessing the suitability of a Crypto Token. These include:

• the token's characteristics, including its purpose, governance structure and founders
• its regulatory status in other jurisdictions
• the size, liquidity and trading history of its market
• the technology connected with the token
• whether the token's use could prevent compliance with legislation administered by the DFSA.?

At the same time, the Rulebook provisions relating to the recognition of Crypto Tokens and the initial list of recognised Crypto Tokens have been removed.¹°

Activities Requiring Approval When Involving Crypto Tokens

The amendments also expand the range of activities that require regulatory approval when conducted in relation to Crypto Tokens. Rule GEN 3A.2.1(1)(d) now provides that DIFC approval is required where activities involving Crypto Tokens include:

• Managing a Collective Investment Fund
• Providing Trust Services
• Acting as the Trustee of a Fund
• Making or approving a Financial Promotion relating to a Crypto Token
• Offering Crypto Tokens to the public.¹¹

These activities may only be undertaken where the Crypto Token involved has been assessed as a suitable Crypto Token, except in the case of Fiat Crypto Tokens, which remain subject to DFSA assessment.¹²

Ongoing Obligations for Firms Engaging in Crypto Token Activities

Rule GEN 3A.2.1A introduces additional obligations for Persons conducting activities involving Crypto Tokens that are not Fiat Crypto Tokens. Among other things, the rule requires firms to:

• disclose Crypto Tokens assessed as suitable to current and prospective clients
• monitor suitability assessments on an ongoing basis
• take appropriate action if a Crypto Token is no longer suitable
• demonstrate that their assessment satisfies the DFSA's suitability criteria
• where the Person is an Authorised Person, submit a Crypto Token information return each month through the DFSA electronic portal.¹³

These amendments therefore shift responsibility for assessing token suitability from the regulator to the firm, while imposing continuing disclosure, monitoring and reporting obligations.

Transitional Provisions

The amendments introduce revised transitional rules in GEN Chapter 10.

Under GEN 10.5.1, Crypto Tokens that were recognised under the previous regime (other than Fiat Crypto Tokens) are deemed to be Suitable Crypto Tokens under the Current Regime.¹4 The Transitional Rules also establish a three-month Transitional Period, during which firms must assess whether previously recognised tokens remain suitable under the new framework.

Amendments to the Conduct of Business Module (COB)

The Conduct of Business Module has also been amended. One significant change concerns client classification. Under the previous framework, Authorised Firms calculating the net assets of an individual client were required to:

• exclude Crypto Tokens that were not recognised, and
• include only 33% of the value of Recognised Crypto Tokens.

These provisions have been removed from COB Rule 2.4.2.¹5

The amendments also remove certain requirements relating to Providing Custody and Arranging Custody for Investment Tokens under COB Rule 14.4.1, which had previously required firms to provide additional documentation relating to key features of Investment Tokens.¹6 However, the safe custody provisions in Appendix 6 now require firms assessing third-party custodians of Crypto Tokens to consider matters such as:

• whether the third-party agent is authorised and supervised by a Financial Service Regulator;
• the adequacy of the agent's custody policies and controls; and
• the robustness of the custodial technology used.¹7

Amendments to the Collective Investment Rules (CIR)

The amendments to the Collective Investment Rules remove earlier restrictions affecting funds investing in Crypto Tokens.

Previously:

• External Fund Managers were restricted from managing Domestic Funds that invested in Crypto Tokens;
• External Funds faced restrictions on investing in Crypto Tokens; and
• Foreign Funds investing in Crypto Tokens faced marketing restrictions.¹8

These restrictions have now been removed.

As a result, Fund Managers may manage Domestic Funds, External Funds and Foreign Funds regardless of whether those funds invest in Crypto Tokens, subject to compliance with the broader regulatory framework.¹?

The amendments also clarify that exposure to Crypto Tokens arising solely through tracking an index that does not track Crypto Tokens will not be treated as an investment in Crypto Tokens for regulatory purposes.²°

Conduct Principles and Authorised Individuals

Further amendments, scheduled to take effect later in 2026, expand the application of the Conduct Principles. Under the revised GEN Chapter 4, the Conduct Principles will apply not only to Authorised Persons but also to Employees of Authorised Firms who perform a Licensed Function, as well as employees involved in certain specified activities.²¹

A new Conduct Principle 7 has also been introduced, requiring individuals to disclose appropriately any information of which the DFSA would reasonably expect notice.²²

Additional amendments in GEN Chapter 7 require Authorised Firms to:

• ensure that individuals performing Licensed Functions are fit and proper before submitting authorisation applications;
• assess fitness and propriety in accordance with APP7;
• review that assessment annually; and
• maintain records that must be made available to the DFSA upon request.²³
• Applications for Authorised Individual status must now be submitted through the DFSA electronic portal.²4

Conclusion

The DFSA's amendments represent an evolution in the regulatory framework governing Crypto Tokens within the DIFC. Except in the case of Fiat Crypto Tokens, firms are no longer limited to Crypto Tokens recognised by the DFSA. Instead, the framework introduces a firm-led suitability assessment regime, requiring firms to evaluate whether a Crypto Token is suitable before engaging in certain activities involving it. At the same time, the amendments remove several restrictions affecting funds investing in Crypto Tokens, revise aspects of client classification rules, and expand the application of the Conduct Principles to additional individuals within authorised firms.

Footnotes

1. DFSA Rulebook, GEN Rule 3A.2.1.

2. DFSA Rulebook, GEN Rule 3A.2.1 (Fiat Crypto Token treatment).

3. DFSA Rulebook, GEN Chapter 4 – Conduct Principles (as amended).

4. DFSA Rulebook, CIR Rules 6.1.6, 6.2.4, 15.1.5, 15.1.6, 15.1.9 (as amended).

5. DFSA Rulebook, GEN Chapter 2.

6. DFSA Rulebook, GEN Chapters 3 and 10.

7. DFSA Rulebook, GEN Chapter 3A.

8. DFSA Rulebook, GEN Rule 3A.2.1.

9. DFSA Rulebook, GEN Rule 3A.2.1(2).

10. DFSA Rulebook amendments removing Recognised Crypto Token provisions (GEN Chapter 3A).

11. DFSA Rulebook, GEN Rule 3A.2.1(1)(d).

12. DFSA Rulebook, GEN Rule 3A.2.1.

13. DFSA Rulebook, GEN Rule 3A.2.1A.

14. DFSA Rulebook, GEN Rule 10.5.1.

15. DFSA Rulebook, COB Rule 2.4.2.

16. DFSA Rulebook, COB Rule 14.4.1.

17. DFSA Rulebook, COB Appendix 6 – Safe Custody Provisions (A6.5).

18. DFSA Rulebook, CIR Rules 6.1.6 and 6.2.4 (prior regime).

19. DFSA Rulebook, CIR Chapter 6 and Chapter 15 (as amended).

20. DFSA Rulebook, CIR Rule 1.6.

21. DFSA Rulebook, GEN Rule 4.3 (as amended).

22. DFSA Rulebook, GEN Rule 4.4.7.

23. DFSA Rulebook, GEN Rules 7.6.1, 7.6.2 and 7.7.

24. DFSA Rulebook, GEN Rule 7.6.3.

25. DFSA Rulebook, FEES Chapter 2 – Rule 2.9B (removed).

26. DFSA Rulebook amendments to AMI Module and Markets Rules Module.

27. DFSA Rulebook, Glossary Module amendments.