“Things like algorithmic stablecoins, it’s a little less transparent about how they operate and being able to redeem them,” Wallace said, adding that the DFSA’s approach aligns with other regulators emphasizing asset quality and liquidity.
Asked about Ethena, one of the fastest-growing algorithmic stablecoins, Wallace said it would not qualify as a stablecoin under the DIFC framework, though it would not be banned outright.
“In our regime, Ethena wouldn’t be considered a stablecoin,” she said. “It would be considered a crypto token.”
Industry-led approval process
Beyond privacy tokens and stablecoins, the revised framework marks a significant shift in how crypto assets are approved for use in Dubai’s financial free zone.
Rather than publishing a list of approved tokens, the DFSA will now require licensed firms to assess and document whether the crypto assets they offer are suitable, and to keep those decisions under ongoing review.
The change, Wallace said, was driven by industry feedback and reflects a maturing market rather than a lighter regulatory touch.
“The feedback from firms was that the market had evolved,” she said. “They themselves had evolved and become more familiar with financial services regulation, and they want to have the ability to make that decision themselves.”
Wallace said the approach aligns with the thinking of other international regulators that responsibility for asset selection should rest with firms, not supervisors.