Upcoming Amendments to DIFC Foundations Law: Embracing Digital Asset Laws and Regulations

The DIFC Laws Amendment Law, DIFC Law No. 2 of 2023, proposes to introduce several changes to the existing DIFC laws, including the “Foundations Law 2018”.

What is the key implication of the proposed amendment?

One key modification involves incorporating the term “digital assets” into the definition of assets eligible for possession by a DIFC Foundation. This implies that a DIFC Foundation has the authority to possess, oversee, and transfer digital assets, encompassing cryptocurrencies, tokens, smart contracts, and other electronic records with inherent value or associated rights.

The proposed amendment to include the term “digital assets” in the Foundations Law 2018 reflects the DIFC’s intention and commitment to foster innovation and embrace new technologies. It also provides more flexibility and opportunities for DIFC Foundations to diversify their portfolios, manage their assets, and achieve their objectives, whether they are charitable, family, or commercial in nature.

What are some of the challenges in respect to the proposed amendment?

However, the suggested amendment also presents legal and practical complexities and risks for DIFC Foundations engaging with digital assets, including:

• The volatility and uncertainty surrounding the value and regulation of digital assets across various jurisdictions.
• Ensuring the security and custody of digital assets to prevent cyberattacks, fraud, or theft.
• Complying with anti-money laundering, counter-terrorist financing, and sanctions rules and obligations.
• Addressing the taxation and accounting implications associated with holding, transferring, or disposing of digital assets.
• Establishing effective governance and oversight mechanisms for the Foundation council and other officers concerning digital assets.
• Implementing enforcement and dispute resolution mechanisms in the event of any breach of trust, fiduciary duty, or contractual obligation involving digital assets

DIFC Foundations that intend to hold, transfer, or deal with digital assets should seek legal advice and guidance on the implications and requirements of the proposed amendment and the draft Digital Assets Law, as well as any other relevant DIFC laws and regulations.

How can we help?

A compelling reason to choose the DIFC for setting up a foundation lies in the clearly outlined and flexible legal framework offered by the Foundations Law 2018, governing the establishment and operation of foundations within the jurisdiction.

Should you be considering the establishment of a Foundation in the DIFC or wish to comprehend the consequences of the suggested modifications, or if you have any inquiries or apprehensions regarding the proposed changes, we encourage you to reach out to our offices for proficient advice and support. With our substantial experience and proficiency in guiding clients through the DIFC legal and regulatory landscape, we can assist you in navigating the Regulations’ demands and opportunities.