DIFC announces enactment of new Digital Assets Law

DUBAI: Dubai International Financial Centre (DIFC) announced the enactment of the world’s first Digital Assets Law, a new Law of Security and related amendments to select existing legislation to cater for the consequences of the new digital assets regime and revised security regime.

The legislative enactments aim to ensure DIFC Laws keep pace with the rapid developments in international trade and financial markets arising from technological developments, and to provide legal certainty for investors in, and users of, Digital Assets.

Following extensive review of the legal approaches taken to digital assets in multiple jurisdictions, and a period of public consultation in 2023, DIFC is now enacting its own Digital Assets Law.

Existing DIFC laws such as the Contracts Law, Law of Obligations, Law of Security, Law of Damages and Remedies, Trust Law and Foundations Law have also been updated through DIFC Amendment

Law, No. 3 of 2024, to cater to specific issues arising in relation to this asset class.

Updates to the Law of Obligations also provide for the use of electronic transferable records. Electronic transferable records are functionally equivalenttopapertradedocumentsorinstruments such as bills of lading, bills of exchange, promissory notes and warehouse receipts. Recognition of such documents in electronic form facilitates greater efficiencies within cross-border digital trade by increasing the speed and security of transmission of documentation and allowing for the automation of certain transactions through smart contracts.

Similarly, a great deal of innovation has taken place in secured transactions regimes internationally - particularly since the DIFC Law of Security was enacted in 2005. This includes the emergence of businesses and plaforms that enable the extension of credit in, and secured or covered by, digital asset collateral arrangements, and an increasing drive to digitise international trade.

Following consideration of regimes in other jurisdictions and, in particular, UNCITRAL’S Model Law on Secured Transaction, in conjunction with the new Digital Assets Law, DIFC is repealing the 2005 Law of Security, and replacing it with a new Law of Security to significantly amend and enhance DIFC’S securities regime.