A First Look At Qatar’s 2024 Digital Assets Regulations

On September 1, 2024, the Qatar Financial Centre (QFC) took a major step towards becoming one of the leading crypto countries in the Middle East. Over the past few years, Qatar has been actively developing its financial sector through initiatives like the Third Financial Sector Strategic Plan, which focuses on modernising regulatory frameworks and fostering innovation in fintech. The country has also made significant investments in digital infrastructure and technology, aiming to attract global crypto businesses and position itself as a hub for digital asset activities in the region.

Aligning with the Plan, the digital finance sector published the QFC Digital Assets Framework 2024 which consists of three key acts:

1. Digital Asset Regulations
2. Investment Token Rules
3. Investment Token (Miscellaneous Amendments) Rules

These three acts are relatively brief and clearly written with the aim to collectively form a comprehensive regulatory framework, governing digital assets and investment tokens. These three acts are further complemented with other acts, including the Companies Regulations, Contract Regulations and few other rules and guidelines.

The Digital Asset Regulations 2024 (DAR 2024)

This is the foundational regulation for the digital assets in the QFC. It defines key terms, such as tokens, permitted tokens or token infrastructure, outlining how tokens can be issued, transferred and owned. In this regard Article 12 and 13 are very interesting, as they describe how a permitted token may be generated, following three key steps:

MORE FOR YOU
‘Dancing With The Stars’ Dedication Night Scores—Who Went Home In Week 5’s Elimination?
23andMe To Pay Up To $10,000 To Data Breach Victims—Are You Eligible?
Elon Musk Has Given $75 Million To Pro-Trump Super PAC—So Far

1. Validation: The owner of the asset to be tokenised gets a certificate of validation from a validator, confirming their ownership.
2. Request for Tokenisation: The owner requests a token generator to create a token that represents their validated right.
3. Token Creation and Control: The token generator creates the token on the designated infrastructure. It then provides the owner, or their representative (like a custodian), with the ability to transfer or manage the token.

Once a token is created a validator issues a certificate of validation.

The DAR 2024 further established rules regarding the ownership of tokens, incorporating certain legal assumptions that might be subject to challenge. It is assumed that a person who controls the power to transfer a permitted token may be presumed to be the owner of the token. However, this presumption can be overturned by an order from the QFC Court if it determines that the person did not lawfully obtain either: (a) control over the transferability of the permitted token, or (b) ownership of the underlying asset represented by the token.

Naturally, the rules regarding ownerships have been around for centuries an we know that proving ownership of digital asset can be both evidentiary burdensome and very challenging in practice. Understanding how the evidentiary part will look like will be very interesting.

The DAR 2024 effectively establishes a distinct regulatory zone for digital assets within the QFC, where the state's broader laws, rules, and regulations related to these matters do not apply. This approach allows the QFC to create a tailored regulatory environment exclusively for digital assets, providing a controlled framework that operates independently of other state regulations. This in theory enables the QFC to respond more flexibly to the unique challenges and opportunities in the digital asset sector while maintaining regulatory clarity and consistency within its jurisdiction.The DAR 2024 effectively establishes a distinct regulatory zone for digital assets within the QFC, where the state's broader laws, rules, and regulations related to these matters do not apply. This approach allows the QFC to create a tailored regulatory environment exclusively for digital assets, providing a controlled framework that operates independently of other state regulations. This in theory enables the QFC to respond more flexibly to the unique challenges and opportunities in the digital asset sector while maintaining regulatory clarity and consistency within its jurisdiction.

The Investment Token Rules 2024 (TOKN 2024)

This act specifically focuses on investment tokens - tokens that represent rights in specified financial products or assets. It classifies investment tokens as financial instruments and aligns their treatment with existing financial services regulations.

The rules clarify the conditions under which investment tokens can be issued, traded, and held, designating activities such as operating investment token exchanges and providing custody services as regulated activities. The framework ensures that investment tokens are treated similarly to traditional investment assets, with appropriate regulatory safeguards in place. TOKN is accompanied with the Miscellaneous Amendments Rules, which ultimately introduces amendments to integrate investment token activities into various existing regulatory frameworks, such as anti-money laundering (AML) rules, customer protection guidelines, and investment management regulations. It ensures that token service providers (TSPs) comply with AML requirements, extends disclosure obligations for investment tokens in collective investment schemes, and specifies the standards for advertisements and custody services related to these tokens.

Qatar as the Next Crypto Destination?

This is a positive step forward for Qatar, signalling its ambition to become a key player in the global digital asset landscape. The new regulations demonstrate a clear intent to attract crypto entrepreneurs and foster a more vibrant ecosystem for digital assets, all under close supervision (and control) of QFC.

However, the question remains whether Qatar can truly position itself as the next major crypto destination. While the intention of regulatory clarity is a strong foundation, much will depend on how effectively these rules are implemented and whether the broader ecosystem—such as infrastructure, investment climate, and talent pool—can support the needs of emerging crypto ventures.

The Governor of the Central Bank of Qatar, H.E. Sheikh Bandar bin Mohammed bin Saoud Al Thani, emphasised the importance of this new direction, stating:

“The launch of the regulation on digital assets in 2024 marks a significant milestone in our journey towards the realisation of the Third Financial Sector Strategy”.

While this appears to be a promising start at first glance, a deeper analysis of the regulation and its practical implementation will be essential. Qatar's path to becoming a leading crypto hub will depend on its ability to adapt and evolve, as well as its readiness to compete with other global centres that have already made significant progress in this space.