DFSA’s updated Crypto Token Framework

In our insights article of 5 November 2025, “The DFSA’s new crypto token proposal: A shift toward market-led oversight”, we outlined the regulator’s intention to move away from a prescriptive model of oversight. The Dubai Financial Services Authority (DFSA) has now formally updated its rules on Crypto Tokens in the DIFC, accompanied by supervisory guidelines and a policy statement issued on 15 December 2025. These changes will take effect on 12 January 2026.

Key regulatory development

Firms providing financial services involving crypto tokens must now determine, on a reasoned and documented basis, whether each token meets the DFSA’s suitability criteria. Responsibility for assessment is placed directly on market participants, with the expectation that firms will demonstrate compliance through structured processes and objective evidence.

Supervisory guidelines: Core areas of assessment

The supervisory guidelines set out how firms should approach suitability assessments. The evaluation is context-specific, meaning a token may be suitable for one activity or client base but not for another. Firms must consider the following areas:

1. Token characteristics and governance arrangements and founders

Under this criterion, firms are expected to assess whether a crypto token demonstrates a clear and practical use case, and whether its activity can be effectively traced and monitored on-chain on an ongoing basis.

The regulator has provided explicit indicators to guide firms in conducting this suitability assessment. Notably, the DFSA highlights negative indicators, such as tokens that are purely speculative in nature; like meme coins, which lack real-world application or utility. A particular concern is the concentration of supply, in many cases, meme coins are heavily held by their founders or affiliates. This creates volatility, as large disposals of such holdings can cause severe and immediate price fluctuations.

Conversely, the DFSA also identifies positive indicators. These include tokens with a genuine use case that addresses real-world problems, transparent governance arrangements, and the ability to monitor on-chain activity for compliance purposes. Tokens with a more diversified supply and limited concentration among a small group of holders are also viewed more favourably, as they reduce risks of market manipulation and enhance stability.

2. Regulatory status

Under the regulatory status criterion, firms are expected to consider whether a crypto token has been formally assessed or approved by regulators in other jurisdictions and whether its issuer is subject to ongoing supervision. A positive indicator would be a token that has been reviewed and approved for retail investor use under a comprehensive licensing regime. By contrast, a token that is merely listed on overseas exchanges or referenced in third party registration documents, without any express approval from a financial services regulator, would be regarded as a negative indicator.

Equally important is the regulatory oversight of the issuer itself. Where the issuer is licensed and subject to ongoing supervision by a financial services regulator, including obligations around AML and KYC compliance, transaction monitoring, and reporting, this provides assurance of accountability and transparency. Such status can typically be verified through public registers and disclosures.

Finally, firms should take into account whether the crypto token has been subject to enforcement actions, fines, or bans in any jurisdiction. A clean record with no history of regulatory sanctions is a strong positive indicator, whereas any evidence of enforcement measures would weigh against the token’s suitability. This focus on regulatory recognition and oversight ensures that only tokens with credible approval, transparent supervision, and a sound compliance history are considered appropriate.

3. Market size and liquidity

Under the market size and liquidity criterion, firms should evaluate the overall trading history and resilience of the crypto token’s market globally. This includes examining trading volumes, price volatility, and current market capitalisation. A strong token will demonstrate substantial market capitalisation relative to its trading volume and ecosystem size, reflecting broad adoption and liquidity. Stability in price and circulating supply further supports the token’s resilience and reduces susceptibility to manipulation, whereas markets dominated by a small number of holders present heightened investment and liquidity risks.

Equally important is the ability to accurately price the token. Tokens that are actively traded across multiple exchanges with sufficient liquidity and transparent market prices provide confidence in valuation. In contrast, tokens that are highly volatile and easily influenced by a small number of trades undermine pricing reliability and increase risk and are therefore viewed negatively by the regulator.

Finally, transparency of supply metrics is a critical factor. Suitable tokens will have their total, circulating, and maximum supply clearly disclosed and verifiable on-chain, with consistency across blockchain explorers and whitepapers. This transparency reduces risks of inflation or dilution and ensures investors have reliable information to support decision making. Together, these elements trading history, capitalisation, volatility, and supply transparency form the foundation for assessing whether a crypto token’s market is sufficiently robust and liquid to be considered suitable for the DIFC.

4. Technology resilience

Under the technology resilience criterion, firms should assess both the maturity and stability of the blockchain on which the crypto token is issued, as well as its ability to respond to adverse technological incidents. A strong token will be supported by a well established blockchain network that has been operational for several years, demonstrating high uptime and resilience with no major security breaches or crisis events. Such networks typically maintain thousands of geographically distributed nodes, benefit from strong community support, and have a proven track record of processing transactions reliably and securely over time.

Equally important is the blockchain’s capacity to adapt to cyber incidents. Suitable tokens are built on networks with established incident response procedures, a history of patching vulnerabilities quickly, and transparent communication with users during security events. Protocols that include upgradability features and have successfully coordinated community responses to mitigate past cyber attacks provide further assurance of resilience. In contrast, tokens lacking formal mechanisms for responding to technological incidents, or those that have demonstrated poor preparedness during recent attacks, highlight significant risks.

Taken together, the maturity of the blockchain and its demonstrated ability to withstand and adapt to technological challenges are critical indicators of whether a crypto token can be considered robust and suitable.

5. Compliance with DFSA rules

Under the compliance with DFSA rules criterion, firms should assess whether the use of a crypto token enables them to meet all obligations under DFSA administered laws and rules, with particular emphasis on AML and KYC requirements. A suitable token will operate transparently, allowing transactions to be monitored on chain and supporting mechanisms such as KYC and transaction screening where required. This ensures that firms can maintain effective oversight of activity and demonstrate adherence to the DFSA’s regulatory standards. By contrast, if the design or technical features of a token obstruct transparency or prevent effective monitoring, its use could inhibit compliance and therefore render it unsuitable. The key consideration is whether the token’s structure and functionality align with the regulatory framework, enabling firms to uphold their obligations without compromise.

Practical implications for firms

The updated regime introduces a more structured and predictable pathway for Crypto Token activities in the DIFC. Firms must:

• Establish internal frameworks for assessing token suitability.
• Document reasoning and evidence supporting their conclusions.
• Implement monitoring processes for compliance, market activity, and technological resilience.
• Differentiate assessments according to client segments and business models.
• While firms may take into account another participant’s suitability assessment, they remain responsible for their own determination.

The DFSA’s updated framework shifts the burden of judgment squarely onto firms. This means companies can no longer rely on regulatory pre clearance or industry consensus; they must build defensible, evidence based processes for each token they touch. In practice, that requires not only documenting why a token meets suitability criteria but also showing how ongoing monitoring will catch changes in governance, liquidity, or regulatory status. Firms that treat this as a one off exercise risk falling short what the DFSA expects is a living framework that evolves with the market.

Conclusion

The DFSA’s updated framework represents a significant development in the regulation of digital assets within the DIFC. By placing responsibility on firms to assess suitability, the regime promotes accountability and ensures that oversight reflects the realities of market activity. As the rules come into force in January 2026, firms should prepare to adopt rigorous, well-documented processes that align with the DFSA’s expectations and support the continued growth of a safe and well-regulated crypto environment.

Our team is advising clients across sectors on regulatory compliance, infrastructure, and risks. If you would like to discuss how these reforms affect your business or how to turn regulatory change into competitive edge; get in touch with Tom Bicknell, Barkha Doshi.