Abu Dhabi Global Market’s (ADGM) The Financial Services Regulatory Authority (FSRA) is considering the development of a regulatory framework to supervise virtual currency exchanges and intermediaries, in a sign that authorities in the UAE may allow trade of cryptocurrencies such as bitcoin to progress. 

The FSRA first issued a Guidance on its regulatory approach to Initial Coin/Token Offerings (ICOs) and virtual currencies under the Financial Services and Markets Regulations (FSMR) on 9 October 2017.

The FSRA’s Guidance stipulates that ICOs comprising tokens which exhibit the characteristics of Specified Investments will be regulated as such within FSRA’s regulatory framework. The Guidance sets out that virtual currencies are treated as commodities, where the derivatives trading of virtual currencies is regulated under the FSMR while spot trading of virtual currencies is not. 

The Guidance advises caution to consumers seeking outsized investment returns from trading in virtual currencies due to their price volatility.  In the Guidance, the FSRA also recognises that ICO tokens and virtual currencies do not always fit neatly into existing regulatory classifications and welcomes engagement from the industry regarding those areas where our rules are unclear.

The reguator notes that virtual currencies, although not legal tender, are gaining interest globally.  However, there are risks and concerns; given the anonymous and cross-border nature of virtual currency transactions, they may be vulnerable to money laundering and other financial crimes.  Incidents of cyberattacks and cybercrime are also on the rise.  Several regulators and anti-money laundering bodies in jurisdictions including Australia, the EU, Japan, Singapore and the UK have introduced or proposed regulations to address such risks.

Until further updates, the FSRA reminds market participants using ICOs and virtual currencies to approach FSRA to discuss appropriate treatment within the regulatory regime.

Abu Dhabi Global Market (ADGM), an international financial centre (IFC) located in the capital city of the United Arab Emirates. Established by UAE Federal Decree as a broad-based financial centre, ADGM augments Abu Dhabi’s position as a global hub for business and finance and serves as a strategic link between the growing economies of the Middle East, Africa and South Asia and the rest of the world.

Source: Abu Dhabi Global Market

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