OTC team advises DIFCA on innovative new laws on Digital Assets and secured transactions

On 27 September, the DIFC published Consultation Papers[1] on a new Digital Assets Law, new Law of Security and proposed amendments to a wide range of DIFC Laws.[2] See the DIFC’s press release here.

The proposed new laws and amendments constitute a first-of-its-kind approach to digital assets and secured transactions.

The Consultation Papers and draft laws are the culmination of months of work by the DIFC Authority and a team of OTC’s digital assets and banking and finance experts: Andrew Spink KC, David Russell KC, Nicolas Stallworthy KC, Justina Stewart, Henry Reid, Joshua Cainer, Anson Cheung and Charlotte Elves alongside Hin Liu from Oxford University. 

Key points:

• The work has involved extensive analysis of, not only academic literature and approaches in a wide range of jurisdictions, but also of the practical issues that can arise in the field of digital assets, international trade and financial markets. 
• Some of the proposals in relation to digital assets depart from or go further than the Law Commission’s (for example, in relation to a proposed interference regime for digital assets and bona fide purchase rules).
• The new Law of Security is modelled on UNCITRAL’s Model Law on Secured Transactions.  However, it departs in some respects. For example, unlike the Model Law, the new Law of Security addresses security rights in digital assets and financial collateral (which may itself be a digital asset).  In respect of the latter, the proposed rules differ from the current DIFC Financial Collateral Regulations, which will be repealed with the enactment of the new Law of Security. 
• By containing the laws on secured transactions within one piece of legislation, it will be easier for practitioners to navigate the rules on secured transactions than is often the case in other jurisdictions.
• The proposals will be of interest to a wide range of stakeholders, including:
• banks and financial institutions;
• investment companies and fund managers;
• digital asset intermediaries, including investment companies, custodians, broker-dealers, asset managers and advisors;
• entities involved in hedging and other financial market sales and trading transactions;
• those involved in secured transactions relating to digital assets;
• entities involved in acquisition financing;
• entities involved in international trade; and
• legal advisors.

The proposed legislative changes contained in the Consultation Papers have been posted for an extended 40-day public consultation period with the deadline for providing comments ending on 5 November 2023.

We would encourage those with an interest in these important and developing areas to consider the Consultation Papers and provide feedback on the proposals.

Find out more

To find out more on OTC’s digital assets and banking and finance experts please contact Sam Carter on +44 (0)203 989 6669.

[1] The Consultation Papers No.4 (Digital Assets Law) and No.5 (Law of Security and Financial Collateral Regulations) of 2023 together with the draft laws and amendments are available on the DIFC Legal Database (see the section on ‘Consultation Papers’).

[2] DIFC Contract Law, Implied Terms in Contracts and Unfair Terms Law, Insolvency Law, Law of Damages and Remedies, Personal Property Law, Law of Obligations, Trust Law and Foundations Law.

News 2 Oct, 2023