The Dubai Financial Services Authority (DFSA) proposed a wide-ranging rewrite of its investment fund rules today (Tuesday), opening a consultation that would change how private funds are classified and make licensing easier for managers.
The regulator, which oversees companies in the DIFC, described the review as the most significant review of its funds framework since 2010.
The consultation, titled CP 173, arrives in the name of the Dubai International Financial Centre Wealth and asset management sector It has expanded rapidly, with the center reporting an industry of 321 companies overseeing nearly $176 billion at the end of 2025.
The DFSA framed the package as an attempt to match its rules to a particular fund’s risks and reduce what it called unnecessary regulatory complexity.
Fund ratings are getting a risk-based rewrite
Under CP 173, the DFSA wants to drop strict classifications for specialist private funds in favor of a risk-based approach which it said is better suited to mixed and multi-strategy investment.
The paper also proposes simplifying the licensing process for investment managers, emphasizing that acting as an agent and arranging deals falls under a single asset management licence.
Other measures would modernize key feeder General Fund structures by removing eligibility criteria that the Dubai Financial Services Authority has described as outdated. The regulator also wants to abolish the system of offshore fund managers, a change linked to what it said is growing A pipeline of companies seeking a full license from the Dubai Financial Services Authority.
A separate proposal would expand the scope for employees to invest in employer-managed funds, either directly or through dedicated vehicles. The Dubai Financial Services Authority said that the change aims to support recruitment and retention, and align the interests of employees with those of external investors.
“This reflects our commitment to protecting investors and market confidence, proportionately SystemsCharlotte Robins, Managing Director of Policy and Legal at the Dubai Financial Services Authority, said:
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The regulator said the broader goal was to deepen the DIFC’s asset management base and keep it competitive against global managers, a claim that was not linked to independent data.
Tokenized money and retail access are on the table
Alongside the formal proposals, the DFSA is seeking early feedback on two areas that may become policy later. One is Coding Fund units and Fund assets, including money market token funds.
The other option is a potential system of long-term investment funds that would allow individual investors to access illiquid real economy assets currently open only to professional investors.
The tokenization question is based on previous digital asset work. Provide the organizer Investment code rules In 2021, I have since learned about a short list of cryptocurrency tokens for use in the DIFC.
He stressed that both new topics are in the feedback stage, with no commitment to the draft rules.
Gulf competitors are racing to rewrite the fund’s rules
The Dubai Financial Services Authority does not act in isolation. In November 2025, the Financial Services Regulatory Authority of the Abu Dhabi Global Market, the DIFC’s main regional rival, published Consultation Paper No. 12 of 2025, proposing simplified regulations for smaller managers managing $200 million or less and for managers serving institutional clients only.
That consultation, which closed on 30 January 2026, also moved to exempt employee investment vehicles from fund licensing, mirroring the DFSA’s proposal on employee investment. Abu Dhabi said the fund sector’s assets under management rose 48% year-on-year in the third quarter of 2025.
The idea of retail access has precedents further afield. The EU’s revamped long-term investment fund rules, known as ELTIF 2.0, came into force in January 2024 and opened up illiquid assets to retail buyers, while Britain’s long-term asset fund regime moved in the same way around the same time.
Both have drawn scrutiny over how easy it is for ordinary investors to exit funds that hold private assets, a concern that the DFSA should consider if reactions go too far.
In terms of tokenization, asset managers have already moved forward. BlackRock launched its tokenized fund BUIDL in March 2024, and competitors have since rolled out tokenized money market products. Dubai, for its part, has expanded its scope Digital assets that you recognize in the Dubai International Financial Centre, with the addition of Ripple’s XRP and its stablecoin RLUSD.
The rules face a long way to sign off
The consultation continues until 7 September 2026, with responses submitted through the DFSA’s online form.
After that, the regulator said it will review the applications and finalize the changes to the Collective Investment Law and Rules, the Investment Fund Law, the Regulatory Law and the relevant rulebook units.
Any legislative changes would then be submitted to the head of the DIFC and then to the Ruler of Dubai for approval, leaving the timeline open.
The DFSA warned that firms should not act on the proposals until the final changes are confirmed and published, and said the timing would depend on the amount of changes the new rules require of licensed firms.
This article was written by Damian Schmil at www.financemagnates.com.
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