The Dubai Financial Services Authority (DFSA) has banned the use of crypto privacy tokens in the special economic zone the body oversees, citing anti-money laundering and sanctions compliance risks, CoinDesk reported. 

The change comes as part of a broader update of the DFSA’s crypto rulebook for the Dubai International Financial Centre (DIFC), including a ban on crypto mixers and tumblers and a revised definition of “fiat crypto token,” the news agency reported. 

Elizabeth Wallace, associate director for policy and legal at the DFSA, told CoinDesk that the ban was effectively unavoidable for a jurisdiction seeking alignment with international norms. Permitting the use of privacy tokens would fall out of line with the international standards set by the Financial Action Task Force, she said in the report. 

“[Privacy tokens] have features to hide and anonymize the transaction history and also the holders,” Wallace told CoinDesk. “It’s nearly impossible for firms to comply with Financial Action Task Force requirements if they are trading or holding privacy tokens.”

DFSA separately tightened its definition of what it calls “fiat crypto tokens,” limiting the category to tokens pegged to fiat currencies and backed by high-quality, liquid assets capable of meeting redemptions during stress periods, according to the report. 

Ethena, one of the fastest-growing algorithmic stablecoins, would not qualify as a stablecoin under the DIFC framework, though it wouldn’t be banned outright, Wallace said in the report. 

Read more at CoinDesk