The Dubai International Financial Centre (DIFC) enacted its own Digital Assets Law, DIFC Law No. 2 of 2024 (the “DLA”), which officially came into effect on March 8, 2024.

The DIFC also repealed its 2005 security law and enacted a new Law of Security, DIFC Law No. 4 of 2024. The new regime is modelled on the UNCITRAL Model of Secured Transactions and aims to align the DIFC securities regime with global developments and best practices.

These enactments followed the release of Consultation Papers No. 4 and No. 5 of 2023, whereby the Dubai International Financial Centre Authority (DIFCA) solicited public comment on the proposal to enact the new DLA.

Recognizing the notable role of digital assets as a significant asset class, which presents opportunities within the financial services sector and broader domains, the DIFC proactively established legal certainty and protection. This ensures confidence and clarity for investors and users alike.

Part 2 of the DLA sets out the following definition for Digital Assets: “A thing is a Digital Asset if:

(a) it exists as a national quantity unit manifested by the combination of the active operation of software by a network of participants and network-instantiated data;

(b) it exists independently of any particular person and legal system; and

(c) the thing is not capable of duplication and use or consumption of the thing by one person or specific group of persons necessarily prejudices the use or consumption of that thing by one or more other persons.”

The DLA proceeds to outline their legal characteristics as an intangible property, that is neither a thing in possession nor a thing in action. The DLA also sets out provisions regarding the control of a Digital Asset, general rules as to the title and superior legal title to a Digital Asset, the transfer of title and conditions thereof, as well as the execution of rights upon death, incapacity or insolvency.

Furthermore, the DLA elaborated on the intentional and unintentional impairment of the use of a Digital Asset, and recovery of their control. This legislative enactment marks a significant milestone, as it is the first to establish the legal framework for digital assets and provide clear guidelines on their control, transfer, and management, setting a precedent for future regulatory developments.

Stay tuned for an in-depth article on the new Digital Assets Law in the near future.

You can access the DLA on the DIFC Legal Database: https://lnkd.in/g9BEeVKq