There is a significant amount of room for future innovation and commercial prospects in the trillion-dollar digital asset sector. From the standpoint of regulated financial services, the main focus in many jurisdictions to far has been on regulating and imposing enforcement-related consequences on some of the practical implementations of this asset class.


On the other hand, the core advantages of blockchain technology, the digital assets that can be produced with it, and its use in a variety of use cases will expand and gain significance in a much broader environment. In this sense, there has been substantial ongoing discussion on a number of important legal topics about the precise nature of the legal characteristics and implications of digital assets.


The common law community's international legal developments and rulings have started to shed some light on this matter, but they haven't yet produced a thorough legal framework outlining all of the legal attributes of digital assets and the ways in which investors and users may interact with one another and with digital assets.

After a thorough examination of the various legal frameworks pertaining to digital assets across various jurisdictions and a public comment phase in 2023, DIFC is now drafting its own Digital Assets Law.
 

The DIFC Amendment Law, No. 3 of 2024, has also modified existing DIFC legislation, such as the Contracts Law, Law of Obligations, Law of Security, Law of Damages and Remedies, Trust Law, and Foundations Law, to address particular concerns developing in regard to this asset class.

Transferable electronic records

Additionally, the use of electronically transferable records is permitted by updates to the Law of Obligations. Promissory notes, bills of lading, bills of exchange, and warehouse receipts are examples of paper trade documents or instruments that have an electronic counterpart.
 

By accelerating the speed and security of documentation transmission and enabling the automation of some transactions through smart contracts, the recognition of such documents in electronic form promotes better efficiencies within cross-border digital trade.

DIFC Law No. 4 of 2024, the Law of Security

Comparably, secured transaction regimes around the world have seen a considerable degree of innovation, especially since the DIFC Law of Security was passed in 2005. This involves the rise of companies and platforms that facilitate credit extension through digital asset collateral arrangements that are secured or covered, as well as the growing push to digitize global trade.
 

In light of many legal frameworks, including UNCITRAL's Model Law on Secured Transaction, and the recently enacted Digital Assets Law, DIFC is removing the 2005 Law of Security. In order to greatly improve and modify DIFC's securities regime, it is being replaced by a new Law of Security.

This will give clarification on taking security over digital assets and bring the regime into line with worldwide best practices. By combining the financial collateral rules into a single chapter of the new Law of Security, DIFC is also doing away with the Financial Collateral Regulations.