Abu Dhabi: ICO Tokens Are Specified Investments, Cryptocurrencies are Commodities

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) today published its approach to initial coin offerings (ICOs) and Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term under the Financial Services and Markets Regulations (FSMR).

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The FSRA says that it is acutely aware that ICOs do not always fit neatly into existing regulatory classifications, and that a one size fits all approach to tokens is inappropriate. The FSRA therefore encourages those using ICOs to approach it as early as possible to determine the appropriate treatment within the regulatory regime.

Mr Richard Teng, Chief Executive Director, FSRA of ADGM, said: “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”.

The FSRA says that those ICOs comprising tokens which exhibit the characteristics of specified investments will be treated as such within the FSRA’s regulatory framework. The regulator also sets out that cryptocurrencies are treated as commodities in its jurisdiction.

Follow our Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term Podcast for the latest interviews in the field:

The regulator explains that ICOs represent a novel and potentially more cost-effective way of raising funds for companies and projects. However, the form and quality of transparency varies greatly from ICO to ICO.

It warns that while some market players wish to use ICOs to raise funds in a transparent and robust fashion, others provide very limited or no information beyond a code script, and in these latter cases the risk of fraud is extremely high. Best practice standards, particularly in the unregulated space, are therefore strongly encouraged.