2.8.1. Application for admission of Digital Assets to trading

(1) Applications for the admission of a Digital Asset to trading can be made to a Digital Asset Trading Facility Operator by:

(a) an issuer of a Digital Asset;

(b) a third party on behalf of and with the consent of an issuer of a Digital Asset; or

(c) a Member of the Digital Asset Trading Facility Operator.

(2) A Digital Asset can be admitted to trading on the Digital Asset Trading Facility Operator’s own initiative.

(3) A Digital Asset Trading Facility Operator must, before admitting any Digital Asset to trading:

(a) be satisfied that the applicable requirements, including those in its Admission to Trading Rules, have been or will be fully complied with in respect of such Digital Asset; and

(b) obtain approval of the AFSA in respect of Fiat and Commodity stablecoins, except for stablecoins issued by the Digital Asset Service Providers holding the relevant Licence.

(4) For the purposes of (1), a Digital Asset Trading Facility Operator must notify an applicant in writing of its decision in relation to the application for admission of the Digital Asset to trading.

(5) For the purposes of 3(b), an application to the AFSA by a Digital Asset Trading Facility Operator must include:

(a) a copy of the admission application; and

(b) any other information requested by the AFSA.

2.8.2. Admission criteria

(1) For the purposes of 2.8.1(3)(b), a Digital Asset can be admitted to trading on the Operator’s facility if the Digital Asset Trading Facility Operator is satisfied that:

(a) having considered the matters in (2), the Digital Asset is suitable for use in the AIFC;

(b) the Digital Asset is not prohibited for use in the AIFC; and

(c) for a Fiat or Commodity stablecoin, all of the requirements in (4) or (5) as applicable are met in respect of that Fiat or Commodity stablecoin (and conditions (a) and (b) above are met).

(2) The matters referred to in (1)(a), which the Digital Asset Trading Facility Operator considers, are:

(a) the regulatory status of the relevant Digital Asset in other jurisdictions, including whether it has been assessed or approved for use in another jurisdiction, and the extent to which the laws and regulations of that jurisdiction are equivalent to the requirements of the AFSA;

(b) whether there is adequate transparency relating to the Digital Asset and underlying blockchain, including sufficient detail about its purpose, protocols, consensus mechanism, governance arrangements, founders, key persons, miners and significant holders;

(c) the size (the market capitalisation), liquidity and volatility of the market for the Digital Asset globally;

(d) whether there is a total limit (cap) for the issuance of Digital Asset;

(e) the controls/processes to manage volatility of a particular Digital Asset (tokenomics);

(f) the adequacy and suitability of the technology used in connection with the Digital Asset; and

(g) whether risks associated with the Digital Asset are adequately mitigated, including risks relating to governance, legal and regulatory issues, cybersecurity, money laundering, Market Abuse and other

Financial Crime;

(h) whether a Digital Asset is traceable;

(i) whether there are any issues relating to the security or usability of a DLT used for the purposes of a Digital Asset; and

(j) whether a DLT and smart contract (if any) have been stress tested or subject to independent audit.

(3) In assessing the matters in (2), the AFSA may consider the cumulative effect of factors which, if taken individually, may be regarded as insufficient to give reasonable cause to doubt that the criteria in (1)(a) is satisfied.

(4) In the case of a Fiat stablecoin or Commodity stablecoin backed by a reserve, the additional criteria referred to in (1)(c) are that:

(a) information is published at least quarterly on the value and composition of the reserves backing the Fiat stablecoin or Commodity stablecoin;

(b) the published information referred to in (4)(a) is verified by a suitably qualified third-party professional who is independent of the issuer of the Digital Asset and any persons responsible for the Digital Asset;

(c) the published information referred to in (4)(a) demonstrates that the reserves in respect of Fiat stablecoins:

(i) are at least equal in value to the notional value of outstanding Digital Assets in circulation (that value being calculated by multiplying the number of Digital Assets in circulation by the purported pegged Fiat Currency value);

(ii) are denominated in the reference currency; and

(iii) are held in segregated accounts with properly regulated banks or custodians in jurisdictions with regulation that is equivalent to the AFSA’s regime and AML regulation that is equivalent to the

standards set out in the FATF Recommendations;

(d) the Digital Asset is able to maintain a stable price relative to the Fiat Currency or Commodity stablecoin it references; and

(e) a Person is clearly responsible and liable to investors for the Digital Asset.

(5) If a Digital Asset Trading Facility Operator decides to admit a Digital Asset to trading, the Digital Asset Trading Facility Operator is required to notify the AFSA 10 days prior to the date of the admission of the Digital Asset to trading. 

2.8.3. Events or developments affecting the Digital Asset

(1) If a Digital Asset Trading Facility Operator becomes aware of any significant event or development that reasonably suggests that the Digital Asset no longer meets the criteria in DAA 2.8.2 for it to be admitted to trading, it must immediately suspend or withdraw a Digital Asset from trading.

(2) A Digital Asset Trading Facility Operator must ensure that, where it seeks to offer services in relation to the Digital Asset associated with the new version of an underlying protocol (“hard fork”), this new Digital Asset meets the requirements in DAA 2.8.2.

2.8.4. Publication of key features document

(1) A Digital Asset Trading Facility Operator may permit a Digital Asset to trading only if it has published a key features document on its website about the Digital Asset.

(2) The key features document must include the following if known (or, if not known, after having taken reasonable steps to determine this information, a clear statement must be provided that such information is not known):

(a) information about the issuer and the individuals responsible for designing the Digital Asset;

(b) characteristics of the Digital Asset, including rights attaching to the Digital Asset and any project or venture to be funded in connection with the Digital Asset (if relevant);

(c) details of Persons responsible for performing obligations associated with the Digital Asset and details of where and against whom rights conferred by the Digital Asset may be exercised;

(d) information on the underlying DLT or similar technology used for the Digital Asset, including details of the technology that is used to issue, store or transfer the Digital Asset and any interoperability with other DLT;

(e) information on the underlying technology used by the Digital Asset Trading Facility Operator,  as relevant to making a decision to participate in the Digital Asset, including information on relevant protocols and technical standards adhered to;

(f) details about how ownership of the Digital Asset is established, certified or otherwise evidenced (to the extent relevant);

(g) how the Digital Asset will be valued by the Digital Asset Trading Facility Operator, and an explanation of how this is carried out and what benchmarks, indices or third parties relied on;

(h) the risks relating to the volatility and unpredictability of the price of the Digital Asset;

(i) in the case of a Fiat stablecoin or Commodity stablecoin based on reserves, details about the reserves backing that Fiat stablecoin or Commodity stablecoin and the stabilisation and redemption mechanisms;

(j) cyber-security risks associated with the Digital Asset or its underlying technology, including whether there is a risk of loss of the Digital Asset in the event of a cyberattack, and details of steps that have been taken, or can be taken, to mitigate those risks;

(k) the risks relating to fraud, hacking and Financial Crime;

(l) any other information relevant to the Digital Asset that would reasonably assist the Client to understand the Digital Asset and whether to participate in the Digital Asset, or otherwise use the service(s) being offered to the Client.

Guidance:

The Digital Asset white paper is a document outlining the main economic and technical aspects of a specific Digital Asset. The key features document is a document outlining the main characteristics of the Digital Asset in a simple format to provide potential investors with the aims and benefits of the Digital Asset, along with the relevant risks and limitations. The content of the Digital Asset white paper and key features document should not conflict each other.

2.8.5. Risk warnings

(1) A Digital Asset Trading Facility Operator must display prominently on its website the following risk warnings relating to Digital Assets:

(a) (except in the case of a Central Bank Digital Currency) that Digital Assets are not legal tender or backed by a government;

(b) that Digital Assets are subject to extreme volatility and the value of the Digital Asset can fall quickly (including, in respect of a stablecoin, if it loses its stability peg);

(c) that an investor in Digital Assets may lose all, or part, of the value of their investment;

(d) that Digital Assets may not always be liquid or transferable;

(e) that investments in Digital Assets may be complex making it hard to understand the risks associated with participating in them;

(f) that Digital Assets can be stolen because of cyber attacks;

(g) that trading in Digital Assets is susceptible to irrational market forces;

(h) there being limited or, in some cases, no mechanisms for the recovery of lost or stolen Digital Assets;

(i) the risks of Digital Assets with regard to anonymity, irreversibility of transactions, accidental transactions, transaction recording, and settlement;

(j) that the nature of Digital Assets means that technological difficulties experienced by the Digital Asset Trading Facility Operator or relevant Member may prevent access to or use of a Client’s Digital Assets;

(k) that participating in Digital Assets is not comparable to participating in traditional investments such as Securities; and

(l) that there is no recognised compensation scheme to provide an avenue of redress for aggrieved participants.

(2) Where a Digital Asset Trading Facility Operator presents any marketing or educational materials and other communications relating to a Digital Asset on a website, in the general media or as part of a distribution made to existing or potential new Clients, it must include the risk warning referred to in DAA 2.8.5 (1) in a prominent place at or near the top of each page of the materials or communication.

(3) If the material referred to in DAA 2.8.5 (1) is provided on a website or an application that can be downloaded to a mobile device, the warning must be:

(a) statically fixed and visible at the top of the screen even when a person scrolls up or down the webpage; and

(b) included on each linked webpage on the website.

2.8.6. Undertaking to comply with the Acting Law of the AIFC

A Digital Asset Trading Facility Operator may not admit a Digital Asset to trading unless the Person who seeks to have Digital Assets admitted to trading:

(a) gives an enforceable undertaking to the AFSA to submit unconditionally to the jurisdiction of the AIFC in relation to any matters which arise out of or which relate to its use of the facilities of the Digital Asset Trading Facility Operator;

(b) agrees in writing to submit unconditionally to the jurisdiction of the AIFC Court in relation to any disputes, or other proceedings in the AIFC, which arise out of or relate to its use of the facilities of the Digital Asset Trading Facility Operator; and

(c) agrees in writing to subject itself to the Acting Law of the AIFC in relation to its use of the facilities of the Digital Asset Trading Facility Operator.

2.8.7. Review of compliance

The Digital Asset Trading Facility Operator must maintain arrangements to semi-annually review whether the Digital Assets admitted to trading on its facilities comply with the Admission to Trading Rules.

2.8.8. Admission of Digital Asset Derivatives

(1) A Digital Asset Trading Facility Operator may admit Digital Asset Derivatives to trading if it has obtained the AFSA’s approval to do so.

(2) The AFSA may grant its approval under (1) only if it is satisfied that a Digital Asset Trading Facility Operator has appropriate systems and controls and policies and procedures to determine the appropriateness of Retail Clients to be offered Digital Asset Derivatives.

(3) A Digital Asset Trading Facility Operator that intends to offer Digital Asset Derivatives to Retail Clients must carry out an appropriateness test of a Retail Client and form a reasonable view that the Retail Client has:

(a) adequate skills and expertise to understand the risks involved in trading Digital Asset Derivatives; and

(b) the ability to absorb potentially significant losses resulting from trading in Digital Asset Derivatives.

(4) A Digital Asset Trading Facility Operator must maintain records of the appropriateness test that it carries out in respect of each Retail Client and make such records available to the AFSA on request.

(5) If it considers appropriate, the AFSA may restrict or prohibit the trading of Digital Asset Derivatives for certain types of Clients.

Guidance:

(1) To form a reasonable view referred to in DAA 2.8.8.(3) in relation to a Person, a Digital Asset Trading Facility Operator should consider issues such as whether the Person:

(a) has sufficient knowledge and experience relating to the type of a Digital Asset Derivative offered, having regard to such factors as:

(i) how often and in what volumes that Person has traded in the relevant type of a Digital Asset Derivative; and

(ii) the Person’s relevant qualifications, profession or former profession;

(b) understands the characteristics and risks relating to Digital Asset Derivatives, and the volatility of the prices of Digital Asset Derivatives;

(c) understands the potential impact of leverage, due to which, there is potential to make significant losses in trading in Digital Asset Derivatives; and

(d) has the ability, particularly in terms of net assets and liquidity available to the Person, to absorb and manage any losses that may result from trading in the Digital Asset Derivatives offered.

(2) To be able to demonstrate to the AFSA that it complies with DAA 2.8.8.(3), a Digital Asset Trading Facility Operator should have in place systems and controls that include:

(a) pre-determined and clear criteria against which a Retail Client’s ability to trade in Digital Asset Derivatives can be assessed;

(b) adequate records to demonstrate that the Digital Asset Trading Facility Operator has undertaken the appropriateness test for each Retail Client; and

(c) in the case of an existing Retail Client with whom the Digital Asset Trading Facility Operator has previously traded in Digital Asset Derivatives, procedures to undertake a fresh appropriateness test on at least an annual basis, and if:

(i) a new Digital Asset Derivative with a materially different risk profile is offered to the Retail Client; or

(ii) there has been a material change in the Retail Client’s circumstances.

(3) If a Digital Asset Trading Facility Operator forms the view that it is not appropriate for a Person to trade in Digital Asset Derivatives, the Digital Asset Trading Facility Operator should refrain from offering that service to the Person. As a matter of good practice, the Digital Asset Trading Facility Operator should inform the Person of such decision.