The DFSA is considering how the DIFC funds framework should evolve as tokenisation becomes more relevant to fund issuance, investment and operations. But Consultation Paper No. 173 does not yet introduce new tokenised fund rules.
For tokenisation, CP 173 is deliberately exploratory. The DFSA is asking the market where the existing framework may create practical or regulatory barriers, whether the current Rules are sufficiently flexible for digital fund infrastructure, and whether future policy changes may be helpful.
For fund managers, digital asset businesses and service providers, the immediate task is therefore not to implement a new regime. It is to understand the use case, map it against the current DIFC framework, and identify where the existing Rules may not work cleanly in practice.
Does CP 173 introduce new rules for tokenised funds?
No. CP 173 separates formal consultation proposals from areas where the DFSA is seeking early-stage market input. Tokenisation sits in Part II, under “Items for discussion”. The DFSA states that these discussion items may become policy proposals in the future.
That distinction matters. Firms should not treat the tokenisation discussion as a new rulebook or assume that the DFSA has already decided which changes, if any, will be made. The purpose is to identify areas in which clarification, flexibility or future regulatory development may be needed.
What tokenisation use cases is the DFSA considering?
CP 173 identifies several ways in which distributed ledger technology can interact with Funds and Fund management in the DIFC. These include:
- Funds issuing tokenised Units;
- Funds investing in tokenised Units or other tokenised assets;
- Crypto Tokens forming part of Fund Property; and
- Crypto Tokens being used for Fund operations.
The DFSA is particularly interested in whether current Rules leave gaps, create uncertainty or prescribe processes in a way that may discourage the use of DLT.
Can a DIFC Fund already issue tokenised Units?
The starting point is not a regulatory blank page. CP 173 explains that rules introduced following the DFSA’s 2021 consultation already permit the issuance of tokenised Units and allow Funds to invest in and hold tokenised Units as part of Fund Property. Those rules also address matters including disclosure, custody and technology governance.
The issue now is whether those rules work effectively for the next stage of market development. The DFSA notes that tokenised fund activity has generated significant global interest, but that it has not seen material market development in this area in the DIFC. Market engagement has pointed to legal, regulatory and cost barriers.
Why does a fully digital investor register matter?
A tokenised Unit can represent an investor’s participation in a Fund through DLT. If tokenised Units are the sole means of representation, the ledger may become the authoritative record of how many Units each investor holds.
CP 173 specifically asks whether the existing registration requirements are flexible enough for this model. The practical question is whether a Fund can operate a fully digital register without having to reproduce processes designed around a more conventional register.
For a firm considering tokenised fund issuance, this means the legal and operational design of the register should be analysed early. The technology may be capable of recording ownership, but the structure still needs to fit within the applicable DIFC requirements governing Fund Units and investor records.
What is the DFSA asking about tokenised money market funds?
CP 173 gives particular attention to tokenised money market funds, or tMMFs. The DFSA notes that tokenised Fund Units are being used as collateral in non-centrally cleared derivative transactions and identifies potential benefits including transparent ownership records, automated collateral management and near-instantaneous, or atomic, settlement.
The DFSA is not proposing a dedicated tMMF regime in CP 173. Instead, it is asking the market to explain the opportunities, the regulatory challenges that may arise and how those challenges could be addressed.
Can Funds hold tokenised investments and Crypto Tokens for operations?
The DFSA also considers the position of Funds investing in tokenised Units or other tokenised investments. It recognises that Funds may seek these structures for reasons such as faster settlement and lower operational costs.
A Fund may also need to hold other assets, including Crypto Tokens or Fiat Crypto Tokens, for operational purposes such as settlement or blockchain transaction fees. In CP 173, the DFSA states that it does not consider the current CIR Rules to prevent these types of investments from occurring, but it asks whether that view is accurate in practice and whether regulatory changes would be necessary or helpful.
This is an important distinction between what the framework appears to permit in principle and what may be workable operationally. Firms should identify the exact role of each token or digital asset in the Fund structure rather than treating all on-chain activity as a single regulatory issue.
What should firms review now?
Define the tokenisation model
Identify whether the project concerns tokenised Fund Units, investment in tokenised assets, the use of Crypto Tokens in Fund operations, or a combination of these.
Map the digital register
If DLT is intended to be the sole investor register, document how ownership, transfers, subscriptions, redemptions and record integrity will operate and identify any points of friction with the current framework.
Separate investment assets from operational assets
Distinguish assets held as Fund Property for investment purposes from Crypto Tokens or Fiat Crypto Tokens used for settlement, transaction fees or other operational functions.
Test custody and technology arrangements
Review whether the proposed custody, safeguarding and technology-governance model can operate within the current DIFC requirements and identify any process that becomes difficult when the structure is fully on-chain.
Evidence the regulatory barrier
Where the current Rules appear to create a problem, identify the specific Rule or regulatory process, explain why it creates a practical barrier and describe what clarification or change would address it without weakening investor protection.
Consider whether tMMFs change the operating model
For tokenised money market funds, consider how tokenised Units could be used in collateral and settlement processes and what additional legal, operational or regulatory issues those uses create.
Key takeaway
CP 173 is a signal that the DFSA is examining how the DIFC funds framework interacts with a more tokenised market, but it is not a new tokenised funds regime.
- Tokenised Units are already contemplated by the DIFC framework.
- The DFSA is asking whether current Rules are sufficiently flexible for fully digital structures.
- Tokenised money market funds and on-chain Fund operations are specific areas of interest.
- Any future policy changes will depend on the feedback received and subsequent regulatory development.
Frequently asked questions
Has the DFSA introduced new tokenised fund rules in CP 173?
No. The tokenisation section of CP 173 is an item for discussion. The DFSA is seeking initial market feedback that may inform future policy proposals.
Can a DIFC Fund issue tokenised Units today?
CP 173 states that the DFSA’s existing framework permits the issuance of tokenised Units and allows Funds to invest in and hold tokenised Units, subject to the applicable regulatory requirements.
What is a tokenised Fund Unit?
CP 173 describes it as a token that reflects rights of participation in a Fund by means of DLT. Where it is the sole form of representation, the ledger may become the authoritative record of the Units held by each investor.
Why is the DFSA looking at digital Fund registers?
The DFSA is considering whether existing Rules governing registration of Units are flexible enough for a structure in which the investor register is fully digital and maintained through DLT.
What are tokenised money market funds?
They are money market funds whose Units are tokenised. CP 173 highlights potential uses in collateral management and settlement, while asking the market to identify regulatory challenges and possible solutions.
Can a Fund hold Crypto Tokens for operational purposes?
CP 173 recognises that Funds may need Crypto Tokens or Fiat Crypto Tokens for purposes such as settlement or blockchain transaction fees. The DFSA asks whether the current framework is workable in practice and whether changes would be helpful.
When does the CP 173 feedback period close?
CP 173 requests comments by 7 September 2026. The DFSA states that the discussion feedback may inform policy proposals at a later stage.
Official sources
Dubai Financial Services Authority (DFSA)
- Consultation Paper No. 173, Proposals to Enhance the DFSA’s Collective Investment Fund Framework, 7 July 2026.
- Consultation Paper No. 138, Regulation of Security Tokens — historical source referenced by CP 173.
DFSA Rulebook
- Collective Investment Rules (CIR), Rule 8.7.1 — Unitholder Register.
- Collective Investment Rules (CIR) — current prospectus rules for Funds whose Units are Security Tokens.
- Collective Investment Rules (CIR), Rule 8.2.6 — custody of Crypto Tokens held as Fund Property.
- Conduct of Business Module (COB), Rule 14.5.1 — technology audit requirements.
Tokenised Funds and DIFC regulatory analysis
BLegal advises on DIFC fund structures, tokenisation and regulatory perimeter analysis, including the interaction between Fund rules, digital asset structures and operational models.
If you are considering a tokenised Fund, tokenised Units or on-chain Fund operations in the DIFC, we can help assess the proposed structure against the current framework and identify the regulatory issues that need to be addressed.
Last reviewed: 16 August 2026
Disclaimer. This article is provided for general information only and does not constitute legal or regulatory advice. The applicable framework depends on the specific token, activities, entity structure and jurisdictions involved. Regulatory requirements and interpretations may change. Businesses should obtain advice based on their particular circumstances before making structuring, licensing or commercial decisions.