Dubai-based economic free zone DIFC gets rules to govern Web3 businesses: Full details here

Dubai, the emerging global hotspot for Web3 activities and businesses, has taken another important step to make things more profitable for the people concerned. A layer of regulations dedicated to overseeing the Web3 sector has been placed on top of the Dubai International Financial Center (DIFC). This Special Economic Freeze Zone located in Dubai was introduced in 2004. This Freeze Zone operates under the authority of the Dubai Financial Services Authority – which is an independent regulator exclusive to the DIFC. With the influx of Web3 companies in Dubai, the regulator felt an immediate need to introduce some new laws.

Called the Digital Assets Act, this law adds some new Web3-centric rules while making changes to existing laws on contracts, obligations, security, damages, remedies and foundations.

“The DIFC is excited to announce the entry into force of its Digital Assets Act. We believe this legislation is groundbreaking as the first piece of legislation to comprehensively define the legal characteristics of digital assets as a matter of ownership and to provide for how digital assets can be controlled, transferred and handled by interested parties.” said Jacques Visser, Chief Legal Officer at the DIFC Authority while commenting on the development.

In recent times, the DIFC is gearing up to see a boom in Web3 firms entering the economic freeze zone. Last year in August, the DIFC decided to subsidize 90 percent of the licensing costs for Web3 and AI companies.

The newly enacted laws imposed by the DIFC therefore outline the ways in which digital assets like cryptocurrencies and NFT will be monitored, transferred and processed by industry participants operating outside the DIFC Freeze Zone.

According to Visser, this is the first law in the UAE that comprehensively defines the legal characteristics of digital assets, including them under the provisions of the property law.

“The legislation aims to ensure that DIFC laws keep pace with the rapid development of international trade and financial markets arising from technological developments and to provide legal certainty for investors and users of digital assets,” the DIFC authorities noted in official announcement post that further provides details on the amended rules.

Dubai is often touted as the home of Web3 and several emerging technologies. In 2022, the crypto sector in Dubai came under a set of new regulatory framework. At that time, the UAE had also established the Virtual Assets Regulatory Authority (VARA) — which is an independent oversight body for the governance of the crypto space. However, this law does not apply to the DIFC as the Freezone has its own governing body.