How do you regulate innovation—without killing it? In this special episode of Below the Fold, recorded live at the Dubai FinTech Summit, we sit down with Justin Baldacchino, Managing Director of Regulatory, Banking, Risk, Compliance, Innovation, and Technology at the Dubai Financial Services Authority (DFSA), to unpack how Dubai is building one of the world’s most progressive regulatory environments for digital assets and next-gen finance. From real-world sandboxes to tokenization pilots, Justin shares how DFSA is enabling innovation without compromising trust. 🎙️ Hosted by: Naveen Bharadwaj, CEO of Trescon
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[00:00:00] Welcome to this episode of Date with Tech, brought to you by Trescon in association with Below the Fold and Launch Foundry. I'm your host, Naveen Bharadwaj. Perhaps a familiar face with me. I have today, Justin Baldacchino, who's the managing Director of, uh, Dubai Financial Services Authority. Justin, welcome to Date with Tech.
Thank you so much. Great to be here. Thank you. Happy to have you here. And I'm gonna jump straight into our, uh, our convo here because. One of the things that most people that are, um, trying to learn about the Uua financial landscape wonder is there's DIFC, there's DFSA, there's a DGM, there's Department of Finance, there's Ministry of Finance, then there's UAE, central Bank.
They're confused, right? So I think, uh, it might, uh, serve the, the opportunity. [00:01:00] Well, if you can talk to us about DFS a's specific role problem in the UAS financial landscape. That's fine. It's great. Que great question. Um, I guess from A-D-F-S-A perspective, we've been around for about 21 years now. Um, so if you think about where and how we were established, um, we sit, uh, within 110 acres.
It's a dedicated financial center and it's an international financial center. Uh, we have, uh, coming close to about a thousand firms that have been authorized and registered Wow. Within the financial center. So if you do look at that from a comparison perspective, and then what's unique about the DIFC, um, the community that we actually regulate, uh, we actually have a common law system, so we have our own court system.
Um, and if you, if you. Take a look around, you know, what was done globally. I think we're, we're one of the first to actually do that. So I think it's the visionary leadership of Dubai for. Way ahead in relation to like, let's establish this financial center. And you know, as the old saying goes, you know, if you build it, they'll come.
Yeah. And, and they have come. Yeah. Um, and we've [00:02:00] seen huge growth in the last three years, uh, especially outta COVID. And from 20 22, 20 23, 20 24. They have been our busiest years in regards to new firms coming in, but also the existing firms actually deepening their footprint within Dubai, which is fantastic to see.
Absolutely. And, uh. Just to pick up on that one thing you said, you guys were the first in the world. I think there is no two ways to that. Right. Because Dubai and the leadership here is you're either number one or, or you're not there at all. Correct. So, and you, and you try to buy, you know, you, you, you try to build the, the biggest thing possible, and I think we see it across the skyline here.
Yeah. Bir for itself still one of the tallest buildings in the world. So it's, yeah. It, it has a flow on effect. And I think the ecosystem sort of draws on each other Yeah. To make things bigger and better. Uh, and they've definitely done that here. So 113 acres and a thousand plus companies and counting, that's Yes.
That's huge. That's almost a city in itself, isn't it? It's amazing. Yes. And I think, uh, hundreds of thousands of people perhaps working across, uh, different companies working across, but also the, the ecosystem [00:03:00] is just drawing more and more people into the, the DFC. Yeah. Yeah. So DFSA regulates DIFC companies.
Correct. Only. Correct. And the common law system is exclusive, correct. DIFC registered companies. So if you think about it, what's unique about it is within that 110 acres of the DIFC, um, we have the ability, um, to have our own rules, regulations, and regimes. I. Um, within that, the only thing that we don't have control over is from the fact of criminal law.
So if you do something wrong within the DIC, uh, that's gonna be the same, you know, across the divide. Yeah. But everything else, we have our, our own employment law, uh, we have our own personal data law. Mm-hmm. Um, and, you know, the court system itself is contained within the DIC. C. Which, which is again, quite unique.
Yeah. Fantastic. Fantastic. Now, uh, one of the things that Dubai has also done a fantastic job with. It's not just, you know, the DFC or the DFC, but also when it comes to adoption of blockchain Yes. And adoption of, um, tokenization. Yes. I think the leadership here, the government as well as generally the community has, uh, has, has [00:04:00] gone many steps forward compared to a lot of other countries.
Yes. Now. Okay. DFSA launched the tokenization regulatory sandbox, right? Yes. Correct. So, curious to know what was the drive, where did, where did this spark come from? Yes. And what does this, uh, this tokenization regulatory sandbox do, and how does it benefit, uh, the community at large? So what it is, the, the base of the sandbox itself is leveraging off our innovation testing license.
Mm-hmm. Um, so we've had that. Uh, sandbox itself established since 2017, and what we've been able to do is look at different innovation coming in Yeah. Uh, to Dubai globally and trying to. Sort of react to the demand of what we're seeing from the industry. So the one thing that DFSA does very well, we work very closely with the industry to understand, okay, not only about the trends today, but what did the trends look like into the future.
Mm-hmm. Um, and what we did see is, uh, we released our, um, tokenization regime back in 2021. Mm-hmm. Um, so we already started to see demand then. Um, but [00:05:00] what we've seen over the last few years where that demand has started to grow. Um, so what we thought in order to react to the industry is we put up a expression of interest mm-hmm.
To actually attract, um, firms who are doing tokenization, um, and getting it to leverage from an innovation and testing license perspective. Now, what's unique about our sandbox compared to other regulators globally is they have a. Fully closed sandbox, which means you can do the testing, but you're not dealing with real life clients.
Yeah. And we, we do the opposite of that. We do, okay, let's do the testing and the innovation, but let's test it with real life clients. Nice. But we do it on a restricted basis, so we work very closely with the firm to put 'em through an authorization process. Mm-hmm. And then what we do is trying to determine.
What those restrictions look like. So it's gonna be on a case by case basis. So from a resource perspective, we spend a lot of time sort of, you know, helping those firms grow, but to do it in the right way and to ensure that we still offer [00:06:00] the investor protections of whoever's. Investing in those firms.
So typically sandboxes are guardrail and, uh, boundaries. And the practicality or the applicability in the industry Yes. Is not known until you actually go to market. Correct. And then there are a lot of risks associated with that. So what you're telling me is you are creating that pipe or bridge or pathway to select clients or select communities.
So this in a, can be tested in real life, in real life. Yes. So not just in in production. Yes. Correct. And then for some firms, the, the growth aspects of what they want to do, some can do it a lot quicker. Yeah. And some take more time. Yeah. So what we do is we actually work so closely with the firm to say, okay, if you wanna do it quicker.
We'll work with you in order to, um, then start to release those restrictions, right? So if you do it a great job and you start to expand, you have the right governance and controls and you, you know, and we take a risk-based approach. We're a risk-based approach regulator. We then work with the firm to say, okay, look great.
That first step, second step, you've done it way before maybe, you know, firm B and [00:07:00] C. So then those restrictions will be removed, uh, over time. Right. So innovation friendly regulation. Correct. And, but also listening to the industry, I think the biggest part of the regulator's job is to listen to the industry Yes.
And then react to the industry. The challenge we have, of course, is from an innovation perspective, it moves very quickly. Yeah. So then what we have to do is react to how quickly the industry's moving and update our regime and our rules and our regulations. As quickly as the industry. More, more often than not, the reason why I laughed is, um, people or the industry things that regulators don't listen to them.
Yes. But if they actually look at the casing point here in the Dubai, it's the opposite. Regulators proactively reach out DFSA proactively reach, reach out to the industry. Correct. So, and, and a good way we do that from a, a formal perspective. If you think about the fact that, uh, we're DFSA is one of the regulators that we do.
You know, probably the, one of the most consultation with the industry. So we, we put together say a regime that we want to do or we want to introduce, um, and we put it out for [00:08:00] consultation. And we wait for feedback. Yeah. Once we get that feedback, we read through it all and we say, okay, we didn't, we didn't think about that.
So then we adjust the, um, regime itself to take a risk-based approach to make sure also we have the firm in mind, but also make sure we've got the investors in mind, right? Because investor protection is, is our number on priority as a regulator. We need to build the trust. And I think the DFSA over the 21 years of existence has been able to build that trust over time.
So you mentioned investor protection a couple of times. Yes. So I think it's, uh, perhaps an internal mature priority. Right. So can you talk a little bit about that? Because, uh, emerging technology is this amazing, super awesome landscape. That everybody wants to dip their hands and toes into, investors wants to put their money into.
But as DFSA, what role or how do you balance this innovation, investment risk, ation and protection of the money that's actually being, uh, deployed? Yeah, so we, we do that on a daily basis. So we have a lot of, uh, bilateral meetings. Um, we do a lot of thematic reports. Mm-hmm. So try [00:09:00] to mm-hmm. Understand what the risk is of the ecosystem.
And then what we do, we do a lot of outreaches, right? Um, so we have a huge amount of outreaches where it's on a particular topic. It might be on crypto tokens. Mm-hmm. It might be on tokenization, but it might be on just safeguarding funds. Yeah. Um, of, um, you know, people who are investing. So, uh, not only do the, the firms want it, but also the investors want it true.
Um, and, uh, you know, for us it's a win-win, but it's making sure that you do have the ability to. Uh, have those open discussions and it's not the fact that it's, you know, open for, um, all changes. Mm-hmm. But we wanna listen to the industry and we want to be able to work with the industry to get to that safe point.
Yeah. Yeah. Absolutely. So, uh, speaking of that, again, digital assets is a space, I think it's, correct me if I'm wrong, it's broader than tokenization alone. Yes. Uh. This is no longer a trend, it's no longer a buzzword because digital assets have become a reality. And, uh, UAE is, is positioning itself as a digital economy.
[00:10:00] Yes, definitely. Or digital native economy. Right, right. So, uh, what's DFSA doing when it comes to the acceleration of innovation within the digital assets space, but at the same time, making sure that, uh, the regulatory guardrails are all, uh, up, ready, and, uh. I'll give you, look, I'll give you a great example.
And again, this is public information. Um, but a few years back, um, even the more traditional firms yeah, that were probably hesitant to go into this space. Um, you know, over the last few years we've seen a huge lean towards wanting to. Do more in regards to the dis digital asset space. Mm. So a good example of that is, um, standard Chartered Bank, for example.
Mm-hmm. Um, they are, are leaning into the digital asset space because it's the demand that they're seeing from their clients. Yeah. And so they're reacting to that demand, which is extremely positive. Now, what's positive for us is they. Tried to determine, um, a business that they wanted to put in place, which was a digital asset custody business.
Right Now, they could have set that up anywhere around the world. It could have been a Singapore or [00:11:00] Hong Kong, or London or New York. But where did they decide? They decided to do it in Dubai. They looked around Dubai. And when you go to the DIFC, you're actually blown away. By the focus of what Dubai wants to do and what the UAE wants to do.
Yeah. Now the fact that we have a, a AI minister, uh, at the world, the first in the world, the first in the world is phenomenal. Yeah. Um, and so global, these global firms are looking around and saying, actually. If Dubai wants to be at the forefront of innovation and technology, and, and we can see it through the event that we're at, at the moment, it's fantastic, the Dubai Tech Summit.
But the ffc, it's fantastic. So, so for us, um, we are, we are leaning into that, uh, because again, they're one of the first to do that digital custody business. Mm-hmm. Um, and so as a regulator, we also have to work with them because we're learning. As much as anyone else. True. To see the best way to set it up.
Yeah, and the good thing for us, if you think about it, something like custody. It's a traditional business that's been around for decades. True. [00:12:00] But you're doing a digital angle. So when you introduce a digital angle, what is the governance around that? What are your risk and control? Um, and so for us, we need to get comfortable that they've got the appropriate controls.
Yeah. And, and make sure it's appropriate also, um, for people who are actually offering that custody business. Yeah. It's, uh, one of the interesting points that you just mentioned is about the standard chartereds selection of Dubai Yes. As their preferred place right Now I know you're from Melbourne. Yes.
You worked in Hong Kong. Yes. And perhaps a couple of other cities and countries in the world. And then you're here in Dubai, uh, for the last six odd years, right? Yes. What do you see is the difference? What's actually driving Dubai? The innovation, uh, as well as, uh, the, let's say the regulatory landscape, the custody landscape, the FinTech landscape, or largely speaking, the financial innovation landscape.
What's the difference? Uh, Justin, look, I'll, I'll tell you what the main difference is, and I'm, and I'm proven fact of that. Um, one thing the DFSA has done mm-hmm. We, we don't [00:13:00] just recruit regulators. We recruit people from industry and we, we recruit regulators as well. Um, my background is, uh, I spent 20 years on the banking side, right?
So I wasn't a regulator before, but my whole career I've dealt with regulators. Um, so previous to this, when I was in Hong Kong, uh, I was, um, the head of regulatory management for JP Morgan. Yeah. Um, and we looked after, I looked after 14 countries, 32 offices. Um, and if I look at my interactions with regulators mm-hmm.
Uh, back then, and I compare it to what we do here in Dubai, uh, it's a total standout. Mm-hmm. Um, and what I mean by that, uh, when we get a request for a meeting from an international firm, um. We, we take the meeting and we have these interactions and we listen to the industry, and then we try to work out, okay, what is it that we can do?
And of course, what do we determine that we can't do? So we make it clear to the industry. Um, and I think it's, it's that the small nuances, like what you said, you know, Dubai is open for business, but doing good business the [00:14:00] right way. Yeah. Uh, and uh, if you don't do it. If you don't do good business the right way, then you wouldn't see the growth that we've seen.
Yeah, we've seen phenomenal growth, uh, in relation to, as I said, the new firms coming in record years 20 22, 20 23, 20 24, and our pipeline sees that that growth is gonna continue. No pressure. Yeah, for sure. Now, uh, it's quite interesting that, uh, DFSA. Is Reg is, is recruiting people from within the industry.
So DFS is not just listening to the industry, but it's also bringing the industry definitely into the system Yes. To help make better decisions, to make supervision more aligned with Correct. The changing landscape out there. Yeah. And always taking that risk-based approach. So even with me coming from a, from a bank and now I, I regulate those sort of banks.
Do you like it? I'm, yeah. It's, it's, it's great because it's, it's an understanding. I have that experience of look, um. Institutions always wanna do the right thing. Mm. Uh, by the regulator. And I think what happens is you get a couple [00:15:00] of bad actors that spoil it for everyone. True. 'cause majority of, um, you know, all the firms that we regulate, they.
Wanna meet the regulation, they want to do it the right way. Yeah. Um, and so what we always do, and that, and this comes down also from, you know, top leadership is, you know, from our perspective, from a DAF perspective, my, my own chief executive does always say that, you know, if someone does something wrong, then you should enforce against.
That particular firm or that individual, but don't spoil it for everyone else who's doing the right thing. True. And I think that's so important. So, uh, we, we do have an approach and it's a firm approach. If someone does the wrong thing, we do, uh, enforcement, um, against, you know, the firm itself. Um, we show it publicly to show what the industry should and shouldn't do.
Um, but for us, what we don't want to do is add more regulatory burden, and we see that globally. So when something goes wrong, regulate it, make it strict and impose restric restrictions more, more regulation, impose more restrictions. But how is that gonna foster innovation? It's not gonna foster innovation.
No. It's only gonna be a [00:16:00] deterrent. Correct. Let's, let's, so you can see by the matters of, you know, what we've seen in regards to growth. I think we are, we are doing that the right way. Yeah. Um, we are, we are not here to burden the firms. Actually. We, we have a regulatory burden project where we wanna reduce the amount of burden that we give to firms.
Wow. Because we want to in increase the capability of innovation through each of those firms. The fact that you've all recognized that there could be a regulatory burden. And proactively doing something about it. Correct. I think puts you way ahead of, uh, a lot of your other counterparts out there. Uh, interestingly, I've also read a couple of notices or circlers on DFSA website.
Yes. And I can relate to this accountability on the company as opposed to that industry or the sector or community at large. Correct. So you name them. Yes. And you mentioned what was the situation or scenario, correct. But you're not discouraging people from venturing into that space. You're just warning them of that specific company New York.
Correct? Correct. That incident we're being fully transparent. Yeah. Um, and I think that transparency is, is going a long way. And so when people decide where is it that I, I wanna set up, do I wanna set up in a Hong Kong or a Singapore or New York or London, [00:17:00] uh, you know, we are hearing this more often than than not, they want to be based here, you know, within Dubai.
So for us that's, that's fantastic. On a light local term, habibi. Come to the Dubai. Yes, exactly. I think that's well for the world, right? Firstly, congratulations on another regional first, if not global first, re regulatory college. But I think the fact that you're engaging your counterparts from around the world, taking inputs, ideas, correct.
And then coming up with actionable, perhaps insights or activities or initiatives which could also benefit them. So you are trying to uplift, correct uplift and also. Taking the best of what we are hearing and seeing and make sure that it's fit for purpose for what we want to achieve from a Dubai and a UAE perspective.
And I think the DFSA. That's at the heart of the deer fse. What, what is the best for Dubai and the UAE? Yeah. I think, uh, it, it sits quite nicely with the, the theme of the country, which was announced by, uh, his moad za at the beginning of the year, year of community. Right. Definitely. 2026 is all about community to gather a [00:18:00] stronger Yes.
So you're doing that truly by bringing all those different counterparts from around the world. We are. And, and look, it, it doesn't take a lot when we tell people we're doing a regulatory college in Dubai. Yeah. Everyone wants to come to Dubai. Why wouldn't you want to come? Exactly, exactly. Gimme any good reasons.
Fantastic. Gimme one. Good reason. Exactly. Very good. Exactly. So is it safe to assume that the priorities for DFSC or yourself for the coming years is, um, driving that innovation supervision? Yes. Smart industry focused regulations around, yes. Finance, FinTech, ai, cybersecurity, uh, digitization. Yes. Digital assets, tokenization.
Just generally these emerging technologies, is there something in the mix that we are missing? Yeah, definitely everything that you said, but also ensuring that we always take a risk-based approach. Yeah, because again, we, we have to stand back and think about what risk does this bring to the ecosystem as opposed to just branding everyone as.
You are, you are risky. 'cause that's, that's not the case. Um, and so we have to take a risk-based approach and make sure that we're able to [00:19:00] develop, um, the innovation space, um, and also be consistent with the D 33 strategy of Dubai. The, the aim is to make sure that we create an international financial center that everyone wants to be at.
And I think we're, we're on the way to do that. Fantastic. So. Smart supervision. Yes. Intelligent risk mitigation or ion Yes. And accelerated innovation. So you're trying to bring all of that to make sure that, uh, the industry doesn't see you as that strict, uh, three piece and type penalize, but actually, uh, a friend, uh, an enabler, a partner that can make their business successful, that can help an investor with protection of their money and just generally drive not just the Dubai or the country or the regional landscape, but Yes.
The global landscape. Correct. Fantastic. Correct. Now I wanna ask you one question that's no problem about yourself, but before we jump onto that, is there anything else about DFSA that you wanna share? Uh, any priorities, any new initiatives or something super cool that's coming up? That, uh, you are allowed to share with us?
No, no problem. I think, look, I think the [00:20:00] innovation testing license, yeah. Um, I think it's, it's really important that, uh, your viewers actually know that it does exist. Now, people will say that because we're doing a cohort just for tokenization, it's not limited to just tokenization, it's for anything that has an innovation lens.
Mm-hmm. Um, and so what we do, that process is open. Um, all the time. Um, so anyone can come in and actually talk to us about what they're looking at and what they're focused on. Um, and we can have an, an open discussion. Um, so feel free to contact the DFSA at any time, um, and have that discussion and then take it to the next step in regards to potentially going through I.
A pre-application process and then going through and, and hopefully having that actual innovation testing license going forward. If you, Justin, thank you so much for, uh, joining us today on our, uh, episode of Date With Tech. Look forward to all the amazing things that DFSA is doing, and of course, all the amazing things that you will be driving at your capacity as, uh, the managing director there.
Thank you so much. Appreciate it. Thank [00:21:00] you.