As part of our ongoing research series on global digital asset legal regimes, we analyze and evaluate different regulatory approaches for digital assets. This article covers developments in Qatar, where the country’s financial regulator has recently unveiled a new regulatory framework for digital assets. The change was presented as a huge positive shift towards a regulated digital asset landscape in the media, but it comes with some key limitations on services relating to crypto-assets.
Background and context
The regulatory stance of the Qatar government towards digital assets has evolved over the years. In 2018, the Qatar Central Bank issued a notice to all banks, describing cryptocurrencies as “illegal and unsupported.” This was followed up by a ruling by the Qatar Financial Centre Regulatory Authority (QFCRA) in 2020 that banned all crypto-asset services, covering “anything of value that acts as a substitute for currency, that can be digitally traded or transferred and can be used for payment or investment purposes.”
However, much like the attitude to digital assets in Brazil, the Qatari authorities have simultaneously shown interest in the financial innovation opportunities afforded by DLT. Notably, the QFCRA excluded security tokens from its cryptocurrency ban, with a clarification that these assets were permissible if representative of instruments already subject to regulation.
The 2024 Digital Asset Framework
In October 2023, QFC regulators opened a public consultation on proposals to regulate digital assets, and on 1st September 2024, the Qatar Financial Centre Authority (QFCA) and QFCRA launched the QFC Digital Asset Framework.
The Framework creates a relatively narrow definition of digital assets under Qatari law. Digital assets are described as digital representations of rights on property, which could be financial, such as stocks or bonds, tangible, such as real estate or art, or intangible, such as intellectual property. The new rules also permit the creation of such tokens by “Token Service Providers” (or TSPs). Token services that TSPs can carry out also include custody, brokerage, and the operation of exchange platforms.
However, Article 9 of the Digital Asset Regulations makes it explicit that cryptocurrencies are not in the scope of the new rules. It lays out the definition of a “permitted token” and an “excluded token.” Permitted tokens are issued under specific conditions outlined in further articles of the regulations, involving a legal agreement that must be validated by an authorized validating entity.
In contrast, excluded tokens are defined as those that don’t represent any rights other than the token itself or those that represent or can be used as a substitute for payment. It further clarifies that cryptocurrencies and stablecoins are classified as excluded tokens.
Impact for CASPs
The impact of Qatar’s new Digital Asset Framework for existing CASPs can be considered relatively low since it doesn’t introduce any new restrictions while limiting the scope of opportunity to the tokenization of real-world assets that follow a legally recognized process in Qatar.
Banks, brokers, and exchanges offering services related to crypto-assets have no route to the lawful provision of these services in Qatar under the new rules. However, entities wishing to take advantage of the new Framework can apply to become licensed as a Token Service Provider, which will permit the tokenization of assets and associated services such as custody or trading.
While the opportunity is undeniably smaller than that offered by jurisdictions that have implemented more comprehensive rules, such as the EU MiCA regulation or the new bill in Turkey, the ambitious growth projections in the tokenization segment still create plenty of appeal for this emerging industry.
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Please note that the above article does not constitute legal advice.