Abu Dhabi Proposes Crypto Asset Regulatory Framework

Crypto exchanges are heavily impacted by the new rules

by Deyana Laguna
01 May • 2.5 min
In Regulation

Abu Dhabi financial regulator FSRA published on Monday a consultation paper proposing a legislative framework to regulate cryptocurrency activities.

Dubbed “Spot Crypto Asset Framework,” the document states it aims to address the risks that have arisen with the growth of the cryptocurrency industry.

If the regulation is implemented a number of key crypto market participants will be affected. Individuals trading cryptocurrencies as agents, acting as custodians, or advisors will all have their activities regulated. For crypto asset exchanges, the framework will entail proper regulation as market infrastructures addressing key risks, including anti-money laundering (AML) and counter-terrorist financing (CTF), consumer protection, technology governance and safe custody. Under the proposed regulation, cryptocurrency exchanges will also have to pay the Financial Services Regulatory Authority (FSRA) a $125,000 authorization fee and a $60,000 supervision fee. In addition, they will be subject to a monthly trading levy equal to 0.0015% of the daily trading value.

FSRA CEO Richard Teng said: “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.”

FSRA is one of the three independent authorities of Abu Dhabi Global Market (ADGM), which is seeking feedback from the public and industry participants on the proposed framework, with a deadline until May 28, 2018 for all submissions.

Unlike most governments, the United Arab Emirates (UAE) has been generally receptive to the fast-growing cryptocurrency industry. The ADGM publicly supported the development of cryptocurrencies and Initial Coin Offerings (ICOs) last year. Another UAE-based financial institution, the Abu Dhabi Exchange, even launched a blockchain-based voting system in late 2016.

In February, ADGM said that it was considering a governing framework to supervise virtual currency exchanges. The announcement followed the preliminary guidance on ICOs that the FSRA made last October. The latest proposal supplements the October guidance, the regulator noted in its recent paper.

However, earlier this year ADGM echoed concerns raised by UAE's Securities and Commodities Authority, which warned investors against any fundraising through cryptocurrencies.

ADGM is an international financial centre located in the capital city of UAE. It was set up in 2015 by an UAE Federal Decree that aims to establish Abu Dhabi as a strategic financial link between the economies of the Middle East, Africa, South Asia and the rest of the world.

ADGM comprises three independent authorities: ADGM Courts, the Financial Services Regulatory Authority and the Registration Authority.