The DFSA’s new crypto token proposal: A shift toward market-led oversight

The Dubai Financial Services Authority (DFSA) has released a new consultation paper on 1st October 2025, proposing a series of targeted developments to its regulatory framework for crypto tokens. These changes mark a significant evolution in the DFSA’s approach, shifting from centralised recognition to a more decentralised, market-led model. The proposals aim to support responsible innovation, align with international standards, and reinforce Dubai and the UAE’s strategic priorities in the digital economy.

What are the key updates in the consultation paper?

The most significant change proposed is the shift in responsibility for assessing the suitability of crypto tokens. Under the new framework, the DFSA will no longer determine whether a crypto token is suitable for use. Instead, the onus will fall on the person or entity conducting the activity. These participants must assess suitability based on DFSA criteria and be able to demonstrate their rationale upon request. They will also be required to maintain a public list of suitable tokens, including the name, sticker, and network; and update this list regularly. If a token no longer meets the criteria, the firm must cease related activities and reflect the change publicly. In line with the shift away from DFSA-led recognition, the application fee for Crypto Token recognition will be eliminated.

This self-assessment framework applies to all crypto tokens excluding fiat crypto tokens, for which the DFSA has retained suitability assessment. The DFSA will continue to assess their suitability and will publish a policy statement outlining its methodology, along with a list of approved tokens.

The DFSA also plans on removing regulatory requirements tied to recognised jurisdictions, simplifying cross-border considerations. Restrictions on collective investment funds that invest in crypto tokens; whether directly or indirectly, will be lifted, although all other requirements under the Collective Investment Rules (CIR) that apply to such entities will remain in force.

Conduct of business requirements under the existing regime are also proposed to be simplified. The obligation to provide a Key Features Document (KFD) for crypto tokens and Investment Tokens for those arranging or providing custody will be removed, as will restrictions on the percentage and type of crypto tokens used in the net asset test.

Monthly reporting via a crypto token information return will be introduced, and non-compliance will be subject to Fixed Penalty Notices.

To ease the transition, the DFSA proposes a three-month grace period during which previously recognised crypto tokens will continue to be deemed suitable. After this period, the DFSA will remove its list of recognised tokens from its website and expects firms to implement the new suitability assessments.

The DFSA’s move to decentralise crypto token suitability assessments marks a fundamental shift in regulatory philosophy; from prescriptive oversight to accountability-driven governance. While this empowers firms to innovate with greater autonomy, it also introduces a heightened duty of care and potential liability around governance, disclosure, and ongoing monitoring. The challenge will lie in balancing commercial opportunity with demonstrable compliance, especially as the regime matures.

Who should care?

These proposals are set to reshape the operating landscape for a broad spectrum of stakeholders within the DIFC’s crypto ecosystem. Authorised Market Institutions aiming to admit crypto tokens for trading, clearing, or settlement will need to reassess and adapt their internal processes to align with the new expectations. Likewise, operators of alternative trading systems, custodians, third-party agents, and authorised firms engaged in dealing, advising, or managing portfolios and investment funds related to crypto tokens will face direct implications under the revised framework. Promoters and technology providers that support the infrastructure behind crypto tokens must also prepare for the operational and compliance shifts ahead. For issuers and creators of crypto tokens and those seeking DFSA licences to conduct related activities; the ability to navigate and implement the proposed suitability assessment framework will be essential once the changes are formalised.

What to watch for and next steps

Once these proposals are implemented, the DFSA intends to publish a set of supervisory guidelines for firms conducting the self-assessment. This should be carefully reviewed as it will facilitate the transition towards this new regime by making clear the DFSA’s expectations. 

Firms should begin preparing for a more decentralised suitability assessment model by reviewing internal governance and compliance frameworks, establishing robust token evaluation procedures, updating public disclosures, and preparing for monthly reporting obligations.

The three-month transitional period offers a window for adaptation, but proactive engagement with the DFSA’s expectations will be essential. As Dubai continues to position itself as a global hub for digital finance, these proposals reflect a maturing regulatory environment. Firms that align early with these changes will be better positioned to navigate the evolving landscape and seize new opportunities in the DIFC’s digital asset market.

Our team is advising clients across sectors on regulatory compliance, infrastructure, and risks. If you would like to discuss how these proposed reforms could affect your business please get in touch with Tom Bicknell & Barkha Doshi.