INTRODUCTION

       Why are we issuing this Feedback Statement?

      1.    This Feedback Statement has been issued following the public consultation conducted on the proposed amendments to the AIFC Digital Assets Framework. It sets out the outcomes of the consultation process and is intended to enhance transparency and regulatory clarity, in particular by:

•      summarising the key themes and views expressed by stakeholders during
  the consultation;
•      explaining how the final amendments differ from the proposals consulted on;
•     outlining the main considerations that informed the final policy decisions; and
•       clarifying the rationale for not incorporating certain comments or suggestions.

      Who should read this Feedback Statement?

     2.    This Feedback Statement is particularly relevant to stakeholders who participated in the consultation process, as well as to current and potential market participants engaged in activities involving Digital Assets and other interested stakeholders.

      Terminology

     3.    Defined terms have the initial letter of the word capitalised, or of each word in a phrase. Definitions are set out in AIFC Glossary. Unless the context otherwise requires, where capitalisation of the initial letter is not used, the expression has its natural meaning.

PART I – BACKGROUND

1.    The AIFC Rules on Digital Asset Activities (DAA) came into effect on 1 January 2024. Since then, the AFSA has observed their application in practice and  identified specific areas requiring clarification or enhancement, which led to the proposal of amendments to the AIFC Digital Assets Framework for public consultation.

2.    A key area of focus was the regulatory treatment of firms whose business models do not involve holding or controlling Digital Assets or the use of distributed ledger technology (DLT). The review also covered other areas, including capital requirements, membership scope, and Digital Asset admission.

3.    In developing the proposed amendments, the AFSA actively engaged with market participants prior public consultation to gather input on areas where further refinement may be required. As the feedback received was limited,  we proceeded with a core set of proposals and submitted them to public consultation to facilitate broader stakeholder engagement on any further matters that may be raised by the market.

4.    In July 2025, the AFSA published Consultation Paper AFSA-P-CE-2025-0002, setting out the proposed amendments to the AIFC Digital Assets Framework. The public consultation was conducted from 21 July to 15 September 2025.

5.    Following the conclusion of the public consultation, the AFSA considered the comments and suggestions received. In December 2025, the AFSA Board of Directors reviewed the consultation outcomes and approved the amendments to the AIFC Digital Assets Framework.

6.    The AIFC Rules on Digital Asset Activities and the AIFC Glossary with
the relevant amendments are available on the AIFC and AFSA websites.

The amendments will enter into force on 1 January 2026.

PART II – OUTCOMES OF PUBLIC CONSULTATION

1.    The consultation outcomes confirmed that the proposed amendments addressed relevant and practical regulatory issues, with respondents acknowledging the need for greater clarity and proportionality of the framework. As a result, 2 of the 4 proposals were implemented as originally proposed, including the revised capital requirement for Digital Asset Trading Facility (DATF) Operators and the expansion of DATF membership criteria.

2.    The remaining 2 proposals, relating to the regulatory treatment of Regulated Activities involving Digital Assets and the notification process for the admission of Digital Assets, were refined to take into account stakeholder comments. These refinements were intended to enhance practical application, while maintaining the overall regulatory objectives of the amendments.

3.    In addition, the consultation identified a number of practical and technical issues, which informed further targeted amendments, including refinements to the operation of Digital Asset Trading Facilities, client and membership arrangements, and certain notification and review processes, aimed at improving regulatory clarity, operational consistency, and the practical application of the framework.

4.    Certain suggestions raised during the consultation were not taken forward, as they lacked sufficient justification, fell outside the scope of the DAA, or were considered more appropriate for future policy development or supervisory engagement. The consultation process provided useful input and enhanced the AFSA’s insight into market perspectives relevant to the continuous refinement of the AIFC Digital Assets Framework.

Clarification of criteria for full-scope Digital Asset Service Providers (DASPs)

5.    The revised approach proposed by AFSA to the regulatory treatment of Regulated Activities involving Digital Assets confirmed that all firms conducting activities in relation to Digital Assets should be treated as DASPs, consistent with the DAA Rules, while clarifying that certain governance and technology-related requirements would not apply to firms that do not hold or control Digital Assets or use DLT. During the consultation period, feedback indicated that further clarification of the meaning of “hold or control” may be required.

6.    The AFSA reviewed international regulatory practices to assess how the concepts of holding and controlling Digital Assets are addressed in other jurisdictions. This review showed that, in many cases, these concepts are not expressly defined in regulatory instruments or are addressed only at a high level. The AFSA therefore considered different regulatory approaches in certain jurisdictions and drew on practical regulatory experience to identify an approach that provides greater clarity and relevance for DASPs.

7.    On this basis, the AFSA amended the rules to clarify that a DASP is regarded as holding or controlling a Digital Asset on behalf of, or for, Clients if:

                        (i)         the Digital Asset is directly held by the DASP in an account or Digital wallet; or

                       (ii)         the Digital Asset is held in an account or Digital wallet in the DASP’s name; or

                     (iii)         the Digital Asset is held by a legal entity, or in an account or Digital wallet in the name of the legal entity that is controlled by the DASP; or

                     (iv)         the private key or seed phrase of the Digital wallet is held or controlled by the DASP.

Revision of the DASP’s Board composition requirement

8.    While conducting research to clarify the criteria for full-scope DASPs, AFSA also identified the need to reconsider the requirement for at least one-third of the Board of Directors to comprise Independent Directors. AFSA’s review of international best practices did not identify a consistent requirement of this nature applied specifically to DASPs, most regulators adopt a principle-based approach, requiring Boards to maintain adequate governance arrangements and an appropriate degree of independence to ensure effective oversight without prescribing fixed ratios.

9.    Recognising that existing quantitative threshold for Independent Directors may create unnecessary barriers for DASPs without proportionately enhancing governance outcomes, AFSA has revised the DAA Rules and removed this requirement from the DAA 3.3.2 and DAA 4.4. However, this requirement remains applicable to DATF Operators, as such entities operate trading facilities that warrant a higher level of governance independence and oversight.

Revision of Guidance on post-admission notification 

10. AFSA proposed replacing the prior notification requirement with a post-admission notification requirement under DAA 2.8.2 and, in connection with this change, introduced guidance setting out the information to be included in such post-admission notifications. The proposed guidance required notifications to include details of the internal assessment conducted, confirmation of compliance with DAA 2.8, and identification of any material risks associated with the Digital Asset.

11. We received a comment noting that the DATF Operator’s obligation under DAA 2.8 and related admission rules is to assess the Digital Asset’s compliance with the regulatory admission criteria, rather than to conduct an investment risk assessment. Therefore, to avoid an overly broad interpretation, the reference to “identification of any material risks associated with the Digital Asset” was removed, leaving only the requirements for assessment and confirmation of compliance with DAA 2.8.

Clients of DATF Operators

12. During the public consultation, a respondent suggested clarifying that clients of Members should not be treated as Clients of the DATF Operator, as, under DAA 2.11.1, Members of a DATF Operator and their clients are currently treated as Clients of the DATF Operator, whereas the operational framework of the DATF implies that contractual and regulatory obligations should apply only to users that engage directly with the DATF.

13. AFSA agrees that clients of Members should not be treated as Clients of the DATF Operator, while Members themselves are considered Clients. This approach reflects international practice and ensures coherence within the AIFC framework, without affecting the DATF Operator’s overarching obligations in relation to Market Abuse and Financial Crime. AFSA made corresponding amendments the use of the terms “Clients”, “Members” and “clients” to ensure consistency and avoid regulatory gaps.

Business Rules, Membership Rules and Admission to Trading Rules

14. DAA requires a DATF Operator to maintain Business Rules, Admission to Trading Rules, and Membership Rules. During the consultation, market participants suggested consolidating these into a single set of Business Rules to streamline regulatory obligations. AFSA agrees with this approach and, consistent with the AIFC framework for Authorised Market Institutions, has introduced amendments so that Membership and Admission to Trading Rules form part of the Business Rules governing relations between the DATF Operator and market participants.

Publication of Key Features Document

15. Under DAA 2.8.4, a DATF Operator may admit a Digital Asset to trading only if a key features document is published. While market participants suggested removing this requirement given the availability of information in the Digital Asset’s white paper, AFSA considers that the key features document plays an important disclosure role. Accordingly, the requirement is retained, with guidance clarified to allow incorporation of the white paper by reference, subject to the applicable purpose and information requirements.

16. In addition, market participants proposed removing the requirement to publish a statement where certain information required under the key features document is not known, citing disproportionate technical and compliance burdens. Following a jurisdictional review, AFSA concluded that this requirement was overly prescriptive and has therefore removed it from the final rule, while maintaining the obligation for DATF Operators to take reasonable steps to determine the required information.

Review of compliance

17. The DATF Operator is required to conduct semi-annual reviews to assess whether Digital Assets admitted to trading continue to comply with the Admission to Trading Rules. During the consultation, a risk-based approach to determining the frequency of such reviews was suggested, and AFSA’s review of comparable regulatory frameworks indicated that reassessment frequencies are commonly determined flexibly based on risk.

18. However, taking into account supervisory experience and the current stage of market development, AFSA considers that a semi-annual review remains necessary to ensure effective oversight and market integrity. Accordingly, the semi-annual review requirement is retained, while allowing for adjustments to the review frequency, subject to AFSA’s approval, where a DATF Operator can demonstrate the application of adequate risk-based monitoring procedures.

Admission of Digital Asset Derivatives 

19. In accordance with DAA 2.8.8, a DATF Operator may admit Digital Asset Derivatives to trading subject to AFSA’s approval. A respondent sought clarification on whether additional approval would be required for each individual derivative once a class of Digital Asset Derivatives had already been approved. To clarify this point, AFSA amended the rule to confirm that once a class of Digital Asset Derivatives has been approved, individual Digital Assets within that class do not require separate approvals. This amendment supports regulatory efficiency while maintaining appropriate oversight.

Publication of decisions   

20. DATF Operator is required to notify AFSA in advance and publish a public notice on its website whenever a Digital Asset is re-admitted, suspended, or removed from trading. A respondent suggested removing the obligation to notify AFSA in advance entirely, arguing that DATFs should have the discretion to determine conditions for suspending trading in crypto assets. However, based on the jurisdictional review and supervisory practice, and consistent with the AMI Rules, AFSA amended the provision by replacing the requirement to notify “in advance” with an obligation to notify “immediately” to ensure timely disclosure.

Calculation of an individual client’s net assets  

21. During the consultation, a respondent proposed increasing the threshold for including Digital Assets in the calculation of a Client’s net assets for the purposes of classification as an Assessed Professional Client from 30% to 50%, noting that a higher threshold would support broader participation and market liquidity. AFSA noted that the existing 30% threshold was originally benchmarked against comparable limits applied in other jurisdictions.

22. In considering this proposal, AFSA reviewed international practice and recent market developments. While noting that some jurisdictions are reassessing or even proposing to remove similar limits, AFSA considered that a complete removal of the threshold would not be appropriate at this stage, given the continued exposure to volatility, liquidity risks, and external shocks. At the same time, AFSA recognised that the existing limit could be adjusted to better reflect market maturity and valuation practices.

23. On this basis, AFSA decided to retain a quantitative limit while increasing the threshold from 30% to 50%, striking a balance between safeguards and market flexibility. This revised threshold has been applied consistently across the framework, and in addition the rules were amended to clarify that only Digital Assets admitted to trading on a facility operated by a licensed DATF Operator may be included in the net asset calculation, addressing interpretative uncertainty identified during the consultation.

Technical corrections  

24. In addition to the technical corrections made to the GLO in relation to the definition of a DASP, including aligning the list of Regulated Activities with the intended scope and removing wording inconsistent with the Guidance under DAA 3.2, several minor inconsistencies were also corrected. These included updating the Guidance under DAA 3.8 to include the CIS Rules in the list of AIFC Acts applicable to a DASP carrying on the activity of Managing a Collective Investment Scheme (previously omitted) and amending DAA 3.4.8 (Technology Audit Reports) to replace the reference to “Authorised Firm” with “Digital Asset Service Provider” for consistency.

Feedback not incorporated in the final amendments

25. In addition to the proposals reflected in the final amendments, the consultation also gave rise to a number of further suggestions from market participants. AFSA carefully considered these suggestions alongside the regulatory objectives, supervisory experience, and alignment with international practice, but concluded that they should not be incorporated into the final amendments.

Operational expenses calculation methodology  

26. With regard to the revised capital requirements for DATF Operators, a suggestion was made to clarify the methodology for calculating operational expenses. After reviewing comparable regimes and considering supervisory experience, AFSA decided to maintain a flexible, principle-based approach to capital requirements, ensuring proportionality to the size and complexity of market participants without introducing detailed prescriptive rules for operational expense calculations.

Removal of requirement for AFSA’s approval of Business Rules

27. A further proposal recommended replacing the requirement for AFSA’s prior approval of DATF’s Business Rules with a notification-based approach. AFSA did not support this proposal, as Business Rules constitute a core governance document governing the operation of trading facilities and their relationships with market participants. Maintaining regulatory approval of Business Rules is an important supervisory tool that enables AFSA to ensure effective oversight of trading facilities and is applied consistently across relevant AIFC regulatory regimes.

Removal of technology testing provisions

28. Some respondents also proposed removing certain technology testing and audit requirements under the DAA, on the basis that DATFs already conduct extensive internal testing and undergo external audits as part of their approval and ongoing operations. AFSA did not support this proposal, as robust testing and independent audits are essential to ensure the reliability, security, and resilience of digital asset markets, safeguard client assets and information, and maintain market integrity and investor confidence. These requirements remain consistent with international best practices in light of the operational and cybersecurity risks inherent in digital asset activities.

IT and risk management audit frequency

29. In addition, a proposal was made to change the frequency of independent third-party IT and risk management audits from annual to biennial, citing ongoing internal testing and the cost of external audits. AFSA decided to retain the annual audit requirement, as regular independent reviews are essential to ensure system resilience, effective risk management, and timely identification of emerging technological and cybersecurity risks, consistent with international best practice. Given the pace of technological change and the frequency of new vulnerabilities emerging in this sector, a biennial cycle could materially weaken detection and timely mitigation of risks.

Further extension of period for post-admission notification 

Finally, one respondent proposed extending the period for post-notification for Digital Assets admission from initially proposed 3 business days to 5 business days. AFSA believes that proposed post-admission notification period of 3 business days is already considered proportionate. This timeframe was introduced as a significant relaxation from the standard 10-day pre-notification requirement under the full regime, balancing the need for regulatory oversight with the operational flexibility for DATFs.