DFSA launches consultations on framework for regulating crowdfunding platforms

The Dubai Financial Services Authority (DFSA) has launched the next phase of consultations on its proposed framework for regulating crowdfunding platforms in the Dubai International Financial Centre (DIFC).
The consultation is the second in a series of papers which outline the DFSA's measures to support the sustainable development of crowdfunding, and financial technology more broadly, within the DIFC.
In January, the DFSA issued its first consultation on a proposal for regulating loan-based crowdfunding platforms under a new financial service that provides the fundamental framework for crowdfunding firms.
The latest consultation is an extension of that proposal and deals with the specific risks associated with investment-based crowdfunding. This model of crowdfunding differs to loan-based funding by enabling start-up companies or small businesses to raise financing by selling stakes in their business.
Ian Johnston, chief executive at the DFSA said: "This is our second consultation on our proposed framework for regulating crowdfunding platforms and reflects the increasing importance of this funding source to the UAE's SME sector."
In the UAE, in particular, crowdfunding is expected to become a more established form of financing for the important small to medium sized enterprise sector in the region. A regulatory framework that targets the specific requirements of crowdfunding platforms should ensure the sustainable development of this valuable funding source for SMEs and the UAE economy.
"Our approach remains consistent for loan-based and investment-based crowdfunding platforms in its aim to define a clear structure for the sustainable development of this industry," Johnston said.
The DFSA's proposals for regulating crowdfunding platforms form part of its approach to creating an infrastructure that fosters innovation in financial services. It aligns with the UAE's National Innovation Strategy, promoted by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai, to create an innovation-friendly ecosystem.
The DFSA's consultations on crowdfunding follow the launch of the DIFC's FinTech Hive Accelerator programme earlier in the year. The programme provides a platform for financial services and technology firms to build solutions for the financial sector.
- business@khaleejtimes.com