Qatar digital assets regulation framework to accelerate fintech innovation

The framework came into effect under the QFC’s recently launched Digital Asset Regulations 2024 and reflects Qatar's ambition to establish itself as a global leader in the fintech sector.

A key element of the new framework is the formalisation and recognition of ‘tokenisation’, a process that is central to fintech innovation. Under the new regulations, digital assets are defined as a digital representation of real or personal property rights, which can include financial assets such as stocks and bonds, tangible assets such as real estate, and intangible assets. The process of converting these rights into digital tokens, known as tokenisation, allows for the ‘fractionalisation’ of assets, allowing property rights to be divided into smaller parts and represented by tokens.

Tokens created under this framework rely on ‘smart’ contracts - self-executing agreements encoded in digital form. These contracts automatically enforce the terms of an agreement when certain conditions are met, facilitating secure and efficient transactions using distributed ledger technology (DLT).

The new regulations highlight the role of token service providers (TSPs) in particular, who must now follow guidance provided by the Qatar Financial Centre Regulatory Authority (QFCRA) to ensure the creation, custody, transfer and exchange of tokens are conducted securely.

Legal structure of the new framework

The Qatar Digital Asset Regulations 2024 are underpinned by several key legal instruments, namely:

• the Investment Token Rules 2024, and related amendments under the QFCRA, which regulate the creation and use of investment tokens; and
• amendments to existing laws, including the Anti-Money Laundering and Combating the Financing of Terrorism Rules 2019 and the Collective Investment Schemes Rules 2010, which ensure that digital asset transactions comply with anti-money laundering standards and other relevant regulatory requirements.

The regulations also distinguish between permitted tokens and excluded tokens. Permitted tokens must represent a right in real or personal property, while excluded tokens - such as cryptocurrency tokens used as substitutes for fiat currency (other than those issued or backed by a government authority) - are prohibited under Article 9 of the Digital Asset Regulations 2024.

Impact of the new framework on TSPs

The regulations place significant emphasis on the role of TSPs who are responsible for token creation, custody, transfer, and exchange. The framework mandates that TSPs must be licensed by the QFCRA to operate within the QFC. TSPs must ensure compliance with strict operational and security standards, particularly in the validation, transfer, and custody of tokens.

In addition to licensing requirements, TSPs must follow guidance provided by the QFCRA regarding token technology infrastructure, ensuring that all operations are conducted securely using approved technology.

Opportunities for growth

The new framework presents a wealth of opportunities for companies and entrepreneurs within the fintech space. By establishing a clear legal foundation for tokenisation, the QFC is paving the way for increased investment in tokenised assets such as real estate, commodities, and securities.

With a focus on facilitating secure, transparent, and efficient digital transactions, the framework is designed to attract international companies seeking a regulatory-friendly environment for fintech innovation. By distinguishing itself as a hub for digital asset management and tokenisation, the QFC is well-positioned to lead the region’s fintech revolution.

Ultimately, the Digital Asset Regulations 2024 are a bold step toward transforming Qatar into a leader in fintech, aligning with the country’s broader vision for sustainable economic development. By creating a regulated environment that supports innovation, security, and transparency, the QFC has laid the groundwork for significant growth in the digital assets space. This forward-looking framework will provide businesses and investors with the tools they need to thrive in the Qatar digital economy.

Co-written by Sarah Khasawneh of Pinsent Masons.