The Dubai International Financial Centre (DIFC) has enacted new legislation to provide a comprehensive legal framework for digital assets. The DIFC Digital Assets Law, which was announced March 13, 2024, is the first law globally to define the legal status of digital assets and regulate their use.

Key points of the new Digital Assets Law include:

• It provides a legal definition of what qualifies as a digital asset. To be considered a digital asset under the law, the asset must exist independently, not be capable of duplication, and its use by one party must prejudice use by others. This likely encompasses cryptocurrencies, stablecoins, and NFTs.
• The law establishes the concept of "control" of a digital asset as the basis for determining ownership and title. Control requires the ability to exclusively obtain benefits from and transfer the digital asset.
• Rules are provided for the original acquisition and transfer of title of digital assets based on control and intention. Some exceptions exist for situations like death or insolvency.
• An "impairment regime" outlines circumstances where liability arises for wrongfully interfering with someone's use of a digital asset they control.
• Amendments have been made to other key DIFC laws like the Contract Law, Insolvency Law, Law of Obligations, and Trust Law to accommodate digital assets.

In conjunction with the Digital Assets Law, the DIFC has also enacted a new Law of Security to provide a framework for taking security over digital assets in line with international best practices. The new Law of Security replaces the previous 2005 law and is modelled on the UNCITRAL Model of Secured Transactions.

Commenting on the new legislation, Jacques Visser, Chief Legal Officer at DIFC Authority said:

"DIFC is excited to announce the enactment of its Digital Assets Law. We consider this legislation to be groundbreaking as the first legislative enactment to comprehensively set out the legal characteristics of digital assets as a matter of property law, and to provide for how digital assets may be controlled, transferred and dealt with by interested parties. At the same time, we are also enacting a new Law of Security, replacing the 2005 law. The revised regime is modelled on the UNCITRAL Model of Secured Transactions and significantly enhances DIFC's securities regime to keep pace with international developments in this field and to ensure DIFC remains at the forefront of best practice."

The new laws aim to provide comprehensive regulation and legal certainty for the digital assets sector in the DIFC financial free zone. By establishing a robust legal framework, the DIFC hopes to support innovation in digital assets while appropriately managing risks. The groundbreaking legislation positions the DIFC at the forefront of digital asset regulation globally.