The Financial Services Regulatory Authority (FSRA) of Abu Dhabi has published a document which will be used to provide rules and guidance in the country’s dealing with initial coin offerings (ICOs) and cryptocurrencies.
According to the ADGM, the guidelines are specific to ICOs which aim to raise funds, as well as all individuals and businesses who intend to invest or conduct transactions in any cryptocurrency. In the document, the ADGM acknowledged the need for these guidelines, considering the growing development in the cryptocurrency industry. The ADGM also stated that the FSRA will continuously monitor development in the cryptocurrency industry and revise its guidelines as they deem necessary. The guidelines were put in place to facilitate and monitor sound development in the promising field of financial technology.
The published guidelines start off by acknowledging the growing trend of using virtual tokens to generate funds and conduct transactions in the last few years. However, the ADGM then continues to state the risks involved in cryptocurrency transactions. These risks include fraud, money-laundering, and terrorist financing. The guidelines also emphasize the extreme volatility of the cryptocurrency market. These concerns are addressed as being the essential catalyst for creating guidelines.
The ADGM states that virtual tokens may be used towards regulated activities. To illustrate their point, the ADGM uses remittances as an example. Remittances remain subject to the proper safeguards and are similar to remittances conducted in fiat currencies. The ADGM emphasized that cryptocurrencies are not considered legal tender. However the ADGM did acknowledge that virtual currencies hold value, and as such they can be exchanged for other things of value.
According to the FSRA, cryptocurrencies are considered to be commodities, in much the same way such as precious metals and fuels are considered commodities. The ADGM also states that from a regulatory perspective, cryptocurrencies will be viewed as commodities.
So far, cryptocurrency activities such as mining and spot transactions will not yet be regulated by the FSRA. However, all companies that issue any virtual currency will be regulated as “specified investments" under the FSMR.
The ADGM defines an ICO as where investors exchange existing virtual currencies for a propriety medium of exchange on the platform. The token received in return represents a utility or underlying financial asset. According to the ADGM, all tokens that are issued through an ICO represents a traditionally regulated issuance, similar to shares, debentures or units in a collective investment fund. ICOs will be subject to FSMR regulations. Legally, they will be classified as security tokens.
The ADGM guidelines specify that the FSRA will determine whether an ICO should be regulated by existing FSMR regulations, or whether they demand modified regulations. The Chief Executive Director of the FSRA has openly encouraged ICOs to engage with the FSRA as soon as possible to accurately and swiftly determine the necessary regulatory needs. Teng emphasized the revolutionary aspect of ICOs by stating that ICOs have transformed the financial capital landscape. He expressed his hope that all regulatory bodies would be able to evolve in order to adapt to new financial technology innovations.
The ADGM guidelines specified that tokens do not share the same features as securities. This means that ICO will fall outside of FSMR jurisdiction. However, once an ICO is not regulated by the FSMR, the ADGM warned investors to first research the ICO extensively before investing.
According to the ADGM, the guidelines are specific to ICOs which aim to raise funds, as well as all individuals and businesses who intend to invest or conduct transactions in any cryptocurrency. In the document, the ADGM acknowledged the need for these guidelines, considering the growing development in the cryptocurrency industry. The ADGM also stated that the FSRA will continuously monitor development in the cryptocurrency industry and revise its guidelines as they deem necessary. The guidelines were put in place to facilitate and monitor sound development in the promising field of financial technology.
The published guidelines start off by acknowledging the growing trend of using virtual tokens to generate funds and conduct transactions in the last few years. However, the ADGM then continues to state the risks involved in cryptocurrency transactions. These risks include fraud, money-laundering, and terrorist financing. The guidelines also emphasize the extreme volatility of the cryptocurrency market. These concerns are addressed as being the essential catalyst for creating guidelines.
The ADGM states that virtual tokens may be used towards regulated activities. To illustrate their point, the ADGM uses remittances as an example. Remittances remain subject to the proper safeguards and are similar to remittances conducted in fiat currencies. The ADGM emphasized that cryptocurrencies are not considered legal tender. However the ADGM did acknowledge that virtual currencies hold value, and as such they can be exchanged for other things of value.
According to the FSRA, cryptocurrencies are considered to be commodities, in much the same way such as precious metals and fuels are considered commodities. The ADGM also states that from a regulatory perspective, cryptocurrencies will be viewed as commodities.
So far, cryptocurrency activities such as mining and spot transactions will not yet be regulated by the FSRA. However, all companies that issue any virtual currency will be regulated as “specified investments" under the FSMR.
The ADGM defines an ICO as where investors exchange existing virtual currencies for a propriety medium of exchange on the platform. The token received in return represents a utility or underlying financial asset. According to the ADGM, all tokens that are issued through an ICO represents a traditionally regulated issuance, similar to shares, debentures or units in a collective investment fund. ICOs will be subject to FSMR regulations. Legally, they will be classified as security tokens.
The ADGM guidelines specify that the FSRA will determine whether an ICO should be regulated by existing FSMR regulations, or whether they demand modified regulations. The Chief Executive Director of the FSRA has openly encouraged ICOs to engage with the FSRA as soon as possible to accurately and swiftly determine the necessary regulatory needs. Teng emphasized the revolutionary aspect of ICOs by stating that ICOs have transformed the financial capital landscape. He expressed his hope that all regulatory bodies would be able to evolve in order to adapt to new financial technology innovations.
The ADGM guidelines specified that tokens do not share the same features as securities. This means that ICO will fall outside of FSMR jurisdiction. However, once an ICO is not regulated by the FSMR, the ADGM warned investors to first research the ICO extensively before investing.