Abu Dhabi Global Market (ADGM) is considering and reviewing the development of a framework to regulate and supervise activities of virtual currency exchanges and intermediaries. The new framework is supposed to be robust, risk-appropriate regulatory framework. The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) will regulate the crypto trading in Abu Dhabi. In considering such a framework, the FSRA intends to consult and work closely with industry participants and relevant professional bodies.
The FSRA had first issued a Guidance on its regulatory approach to ICOs and cryptocurrencies on 9 October 2017. Furthermore, The Financial Services and Market Regulations issued these guidelines. The ADGM recognizes that attempting to develop a one size fits all regulatory apparatus for the cryptocurrency industries is inappropriate. And it will approach cryptocurrencies as commodities, whilst legislating many ICOs as “specified investments”. Abu Dhabi’s financial regulator has issued a document to provide guidance to the relevant legislation that cryptocurrencies and ICOs may be subject to. These guidances will be aplicable for any trade within the country. The ADGM states that:
“The guidance is applicable to those considering the use of ICO to raise funds in addition to those those considering transacting in, and the general use of, virtual tokens and currencies. Given the evolving developments in the space of virtual tokens, FSRA will continue to closely monitor industry developments. Also, it may issue further guidance as necessary. That will be in order to facilitate the sound development and deployment of promising financial technology innovations.”
The ADGM asserts that virtual currencies “are not legal tender. However, virtual currencies have ‘value’ in that they can be exchanged for other things of value.” Abu Dhabi’s financial regulator describes “virtual commodities as having much in common with physical commodities such as precious metals, fuels, and agricultural produce” He also said that “from a regulatory perspective, virtual currencies are treated as commodities.”
Abu Dhabi on ICOs
The regulator states that “investors will typically give virtual currencies to an ICO issuer in exchange for a proprietary digital medium of exchange on the [distributed ledger technology] platform. Also, the ADGM states that some tokens represent a utility, as opposed to “an underlying financial asset”. The ADGM asserts that tokens issued through an ICO will be subject to existing regulations under the FSMR. And that they will fall under the legal classification of “securities tokens”. The guidelines state that the FSRA will determine if an ICO is subject to existing FSMR regulations on a case-by-case basis.
Richard Teng, the CED for the FSRA, encourages ICOs to engage with the financial regulator as soon as possible. This is in order to accurately determine the ICO’s regulatory requirements. Teng said that:
“ICOs have transformed the capital formation landscape and global regulatory frameworks are evolving to adapt to such innovation. Participants exploring the issuance of ICOs that offer real value to the market and wish to operate within our regulatory framework are encouraged to engage us early to gain insights into the applicable regulatory regime.”
In conclusion, regulation is always better than an outright ban. Also, UAE Exchange’s joint venture with Ripple has significantly affected its growth.