Abu Dhabi eyes regulatory framework for Crypto market
Regulatory authorities in Abu Dhabi have proposed a legislative framework to bring order to the crypto asset markets in the region.
There have been multiple industry calls for a more comprehensive approach to address the risks in the crypto asset markets, notably from the International Monetary Fund (IMF) and Financial Stability Board (FSB). However, formal rules have yet to be agreed.
To help the industry, The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has published a consultation paper setting out its proposed framework to regulate spot crypto asset activities, including exchanges, custodians and other intermediaries, to be undertaken in ADGM.
FSRA is proposing a fit-for-purpose regulatory framework that effectively addresses the full range of risks associated with crypto asset activities. For crypto asset exchanges, it will entail proper regulation as market infrastructures addressing key risks including anti-money-laundering and counter-terrorist financing (AML/CTF), consumer protection, technology governance and safe custody.
It aims to address concerns from regulators, institutions, corporates and investors by instituting proper oversight over crypto asset activities.
By establishing a regulatory framework, the FSRA says it seeks to advocate a well-regulated regime that assures crypto asset activities are subject to proper oversight, address inherent risks and adhere to high standards. By launching a ‘fair, credible and effective regime’, it is looking to attract retail and accredited investors, and facilitate participation from institutions and corporates that have been largely absent due to inability to address the risks involved.
The level of transparency that this framework fosters will assist in the detection and supervision of systemic and market-based risks, contributing to the growing global understanding and supervision of systemic risks, as sought by global bodies including the FSB and IMF.
Richard Teng, CEO, FSRA of ADGM, said, “As the recognised top MENA Fintech Hub and the Fintech Regulator of the Year 2018[3] for the Middle East region, the FSRA is seeking to instil proper governance, oversight and transparency over crypto asset activities. In our outreach and engagement, many established and responsible participants engaged in crypto asset activities are seeking to be properly regulated by observing high standards on customer protection, custody and technology governance.
“By providing a best-in-class regime, this addresses concerns of regulators and investors alike, particularly institutional investors seeking to gain exposure to this asset class. Our proposed regulatory regime is only possible with our deep understanding and knowledge of the solutions available to address the respective risks and represents the most comprehensive regime proposed by global regulators so far.”
The initiative was launched in close collaboration with a key team of the UAE’s largest financial institution, including the Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Al Ansari Exchange, Al Fardan Exchange, First Abu Dhabi Bank, UAE Exchange and ADGM. It aims to develop a proof-of-concept to decide the governance framework and the functional requirements of the e-KYC utility, with distributed ledger technologies being considered to underpin core functionality within the platform.
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