The Dubai Financial Services Authority (DFSA) has announced the opening of its Tokenisation Regulatory Sandbox, inviting firms to express their interest in participating. This initiative aims to support companies looking to offer tokenised investment products and services within the Dubai International Financial Centre (DIFC). Firms have until April 24 to submit their Expressions of Interest.

The DFSA’s Regulatory Sandbox is part of its Innovation Testing Licence (ITL) program, which allows firms to experiment with innovative financial solutions in a controlled environment. The sandbox provides a regulatory pathway that enables firms to transition from experimentation to full authorisation, thereby fostering growth in the tokenised investment sector.

The DFSA highlighted that its Innovation Testing Licence has successfully supported fintech companies and digital finance innovators in the DIFC. By expanding the ITL’s scope to include tokenised investments, the DFSA aims to bolster Dubai and the UAE’s standing as a leading global hub for digital finance. The ITL Tokenisation Cohort specifically focuses on activities related to issuing, trading, holding, and settling tokenised investments, allowing firms to develop new financial products without the burden of comprehensive regulatory requirements during their testing phase.

Tokenisation is defined as the digital representation of rights and obligations related to an asset on a programmable platform, such as Distributed Ledger Technology (DLT). This process enables safer, faster, and cheaper transactions. The DFSA believes that tokenisation can open up new avenues for utilizing financial assets, which were previously hindered by inefficiencies in traditional systems.

The DFSA first introduced its regulatory framework for Investment Tokens in October 2021 to promote innovation in a responsible and transparent manner. Despite the growing interest in tokenisation, the DFSA has observed limited activity from firms aiming to tokenize investments. To address this, the DFSA held industry roundtables at the Dubai FinTech Summit in May 2024 and January 2025 to discuss the opportunities and challenges associated with tokenisation.

Key challenges identified during these discussions include the need for interoperability among platforms, achieving the necessary scale for widespread adoption, educating customers about tokenisation benefits and risks, and establishing clear regulatory frameworks.

Firms interested in applying to the Tokenisation Regulatory Sandbox must be engaged in tokenisation-related financial services, including those issuing, trading, holding, or settling tokenised investments such as equities, bonds, sukuk, and collective investment fund units. Applications are open until April 24, 2025, and those with strong business models may receive tailored regulatory support and structured testing opportunities. Interested firms can submit their applications through the DFSA’s official link.