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Crowdfunding has garnered considerable attention as a way to raise capital from many small investors or lenders, rather than relying on banks or large institutions. The Dubai Financial Services Authority, or DFSA, launched its initial crowdfunding regime in 2017, enabling licensed platforms in the Dubai International Financial Centre to connect prospective fund seekers with a “crowd” of mostly retail and professional clients looking for opportunities in lending or equity. Although the DFSA’s rules were seen as forward-thinking at the time, the market has rapidly developed, and the regulator now seeks feedback on whether these regulations remain suitable.
In this article, we explore how the DFSA crowdfunding regime has functioned so far, what changes are under discussion, and what that might mean for operators, investors, and the wider fintech community. We also address category-specific issues, such as property-based crowdfunding and the potential for introducing tokenisation. By understanding these updates, platform owners can better prepare for any forthcoming revisions, while prospective entrants or existing businesses can consider how to shape their offerings to meet evolving standards.
Crowdfunding regime and the DFSA’s initial approach
The DFSA defines its crowdfunding regime as a marketplace that matches finance seekers with multiple contributors, each providing small sums. The centre launched three main categories in 2017:
Investment-based crowdfunding: Where a business issues securities, for example equity, to the crowd in return for capital.
Loan-based crowdfunding: Where individuals or companies borrow money from multiple lenders and pay interest.
Property-based crowdfunding: A variation of investment-based crowdfunding, usually focusing on real estate fractional ownership or shares in project-specific entities.
The primary objective of the DFSA crowdfunding regime was to create a regulated environment with sufficient investor protection. Retail participants, in particular, face investment limits to reduce the risk of large losses. The DFSA reasoned that, in this budding sector, additional guardrails are necessary because many investors might be new to these concepts or might misunderstand the complexities of partial ownership and loan structures.
Foundational rules: Key elements in the existing regime
Retail investment caps
The DFSA set maximum amounts that a retail investor can lend or invest through crowdfunding in a single year. For loan-based platforms, a retail individual can lend no more than USD 50,000 annually in total, with a USD 5,000 limit per borrower. For investment-based and property-based platforms, the annual limit stands at USD 50,000 in total. These figures were intended to safeguard the less experienced participants from losing their entire capital in a single high-risk initiative.
Prohibition on staff and certain conflicts
Officers, employees, and close relatives currently cannot lend or invest on the platform, lest they exploit insider information or create conflicts of interest. The regime also prohibits employees and families from active participation in fundraising deals, although the platform itself can invest or lend if it obtains further approvals.
No active financial promotions
Another major element is that crowdfunding proposals should only be advertised to “members” of the platform, meaning prospective investors who have already signed up and presumably read disclaimers. The DFSA sees the platform as a “private club,” so operators must not publicly promote active campaigns or details about a current raise beyond what has been summarised as permissible.
No secondary market
The original regime placed constraints around the transfer of loans or securities. The DFSA was cautious about introducing liquidity features, preferring a straightforward approach in which participants held their shares or loans until maturity or exit.
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Call for evidence: A new perspective
Nearly six years on, the DFSA wants to know how these rules have worked in practice, inviting operators, investors, and stakeholders to provide their input. The regulator recognises that the industry has transformed swiftly, with new technology, added categories of participants, and demands for more flexible secondary markets.
The DFSA highlights specific areas of focus:
Retail limits
The regulator set the limit of USD 50,000 per year and, for loan-based platforms, an additional sub-limit of USD 5,000 per borrower. Market players are asked whether this remains “appropriate” or if the numbers have become too restrictive, potentially hampering growth. They can present evidence, such as average ticket sizes or risk profiles, to show that adjustments might be warranted.
Rewards and incentives
Many platforms want to offer referral rewards or new user sign-up bonuses. The DFSA worries this might push participants to invest without thorough understanding of the risks, or encourage them to hype deals within their social circle. The question becomes how to permit promotions that expand user bases without pressuring less informed individuals into ill-fitting investments.
Conflicts of interest
The DFSA has historically banned employees, officers, and immediate relatives from taking part in deals, yet permitted the platform itself to invest or lend if it secures further licences. This policy was intended to avoid potential abuses, but some stakeholders might argue that staff or families can bring beneficial liquidity. The DFSA asks how best to manage potential insider knowledge, especially if staff can see sensitive data about the borrower or investment.
Financial promotions
The regime restricts revealing details of active campaigns outside the platform, so the public sees only the fact that a platform operates, not the specifics of each campaign. The DFSA wonders if more advanced disclosures, akin to a mini-prospectus, would help or if too much public advertising might create confusion. The question is whether partial or summarised details can be shared publicly, perhaps to educate prospective investors on the types of proposals available.
Transfer facilities
The DFSA is aware that many prospective or existing crowdfunding participants prefer a mechanism for secondary trading of shares or loans. A secondary market can bring liquidity, letting backers exit early. Yet building such a facility resembles a regulated exchange or multi-lateral trading platform, so the DFSA ponders whether a simplified approach might exist specifically for crowdfunding.
Tokenisation
With multiple entities exploring the tokenisation of investments in a crowdfunding context, the DFSA aims to hear from the market how feasible or necessary it is to incorporate distributed ledger technology. They ask if tokenised solutions can simplify distribution or secondary trades, and what new risks might accompany that.
"Tokenisation could modernise ownership and liquidity, but may bring additional licensing requirements if platforms issue security tokens under blockchain frameworks."
Category-specific discussions: Property, investment, and Islamic variants
In addition to general topics, the DFSA calls for input on growth potential in investment-based crowdfunding and whether Islamic structures might gain traction in loan-based offerings. The largest area of interest is property crowdfunding, in which participants invest fractionally in real estate. So far, it has mostly included residential or smaller-scale deals, but operators wonder if commercial real estate should also be allowed.
Other significant concerns include:
Off-plan property
The DFSA remains reluctant to permit off-plan real estate on crowdfunding platforms, calling it high-risk. They want to confirm market opinions on this stance.
Short-term refurbishments
Another area is the possibility of “buy, refurbish, and sell” strategies. The DFSA seeks clarity on the complexities that might come with these deals and if new rules are necessary.
SPV control
Some platforms set up special purpose vehicles to hold property, with the operator maintaining voting rights. The DFSA cautions that if an operator effectively manages the SPV, it can become more akin to a fund manager than a crowdfunder. This might require an additional licence akin to managing a collective investment scheme.
Dealing with regulations that might hamper growth
Operators highlight that the existing regime is helpful, but certain constraints reduce the sector’s potential:
Strict retail caps
Some argue that retail caps of USD 50,000 total can limit the inflow of money, particularly if local HNWs want to spread larger amounts across multiple campaigns. The DFSA’s stance is that inexperienced participants might get in over their head, so any changes must be supported by evidence that the average investor can handle greater risk.
No staff participation
Some companies believe staff alignment with the platform or certain deals can enhance trust, although staff knowledge can lead to front-running or insider advantage. The DFSA aims to find a middle ground, if it is possible, perhaps letting staff invest but restricting them to the same information that general users see.
Advertising constraints
Marketing is vital for any crowdfunding business in the DIFC, so operators want clarity on whether they can showcase real projects or just general capabilities. The DFSA is open to discussing how to provide more robust disclaimers or partial facts about current proposals, so the public can see the sorts of campaigns typically on offer, while limiting the risk of mis-selling.
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Potential introduction of a secondary market
A key factor limiting some crowdfunding deals is illiquidity. If participants must hold their shares or loans until maturity or exit, that might discourage them from making large commitments. Many platforms see a secondary trade mechanism as vital, but it veers close to needing an exchange-like licence. The DFSA is canvassing views on whether a simplified “bulletin board” system would be enough, or if a formal exchange is necessary for regulated trades.
The question is whether or how to incorporate settlement procedures, AML checks for subsequent buyers, and additional disclosures, all while preserving the crowdfunding ethos. A robust approach can bring liquidity and reduce investor risk, but it also complicates the operator’s responsibilities.
Tokenisation and its implications
In line with global fintech trends, many expect tokenisation of assets in the crowdfunding environment, particularly real estate. Instead of distributing conventional shares, a platform might create tokens on a blockchain that represent fractional ownership. This can, in theory, bring transparency and facilitate secondary transactions. The DFSA acknowledges multiple enquiries on this approach but also flags that tokenisation can lead to security token classification. That would require a different licence or set of obligations, including a certain approach to safe custody.
Hence, the DFSA is prompting the industry to demonstrate real market readiness for token-based solutions, clarifying how it can preserve investor protections, oversight, and AML compliance on distributed ledgers.
"The next phase of the DFSA digital assets regime might also shape the path for tokenisation in crowdfunding."
Why the DFSA’s re-evaluation matters for the market
This call for evidence indicates the DFSA’s willingness to adapt, seeking a mature balance of risk and growth. If the regulator loosens retail caps or allows partial secondary trading, crowdfunding might expand significantly. Conversely, if it introduces further restrictions or clarifies some grey areas, operators may have to refine their strategies.
It is also a timely move, given the global economic climate: many businesses and investors increasingly seek alternatives to bank financing or large-scale institutional investment. By leveraging crowdfunding, particularly with updated rules, the DIFC can showcase an agile environment that meets the needs of modern entrepreneurs.
Remaining prudent around consumer protection
Even if the DFSA relaxes certain limits, that does not imply an unregulated environment. The regulator consistently emphasises consumer protection, ensuring that, for instance, referral bonuses do not manipulate behaviour or that staff cannot exploit confidential borrower data.
The best practice remains: a detailed KYC on both sides, clear disclaimers that highlight the potential of total capital loss, and ensuring no false sense of guaranteed returns. By maintaining these principles, the DFSA can foster a stable ecosystem that balances innovation with reliability.
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Conflicts of interest, platform promotion, and AML safeguards remain central, with the DFSA emphasizing transparency, investor suitability, and strong governance regardless of any rule relaxations.
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The DFSA’s call for feedback shows a willingness to evolve, aiming to support fintech growth while retaining strong consumer protection and regulatory oversight.
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Aston VIP provides full regulatory support, helping platforms navigate licensing, compliance, and business planning for crowdfunding services under new or changing DFSA rules.
A potential shift in property, commercial deals, and SPV control
Many predict that the biggest changes might focus on property-based crowdfunding, especially if commercial real estate becomes allowable for certain professional clients. That shift could bring major expansions, as developers or real estate operators in the UAE might attempt to raise capital from a broader group of investors. If done responsibly, this can democratise access to large-scale projects.
Another nuanced aspect is how the operator sets up the special purpose vehicle that holds the property or investment. If the operator fully controls that SPV, making all decisions about management, maintenance, or liquidation, the DFSA could classify it as collective investment management rather than straightforward crowdfunding. This classification triggers new licensing obligations, something the regulator wants to clarify so that operators do not inadvertently sidestep stricter rules.
Aston VIP’s role in your licensing journey
Whether you are an existing platform operator planning to adjust to new rules or a startup aiming to enter the DIFC, the changes to the DFSA crowdfunding regime could reshape your roadmap. Aston VIP offers end-to-end guidance on licensing, from refining your business model and drafting compliance policies to liaising with the DFSA during consultations. We can advise on bridging the gap between your objectives and the regulator’s expectations, including evaluating how tokenisation, secondary market features, or new property-focused deals might require additional permissions.
If you want to align your platform with the latest DFSA insights or prepare your business for the upcoming changes, contact us so we can plan a thorough approach to your crowdfunding licence or potential expansions.
