ADGM Regulator Amends Crypto Terminology to Adopt FATF Standards

FSRA has moved the applicable rules on crypto firms from a bespoke category to the respective underlying activities.

The financial watchdog of Abu Dhabi Global Market (ADGM) has unveiled various amendments to its dedicated cryptoasset regulatory framework, which has been included in the FSRA’s core regulations since 2018.

The Financial Services Regulatory Authority (FSRA) updated and greatly expanded guidance that includes a more granular level of detail and addresses a range of topics not covered in the initial guidance.

More specifically, the new amendments have mainly changed the terminology of “Crypto Asset” to “Virtual Asset.” The change intends to make relevant terms more aligned with those used by the Financial Action Task Force (FATF), a 37-nation group set up by the G7 industrial powers.

The Paris-based FATF developed a series of recommendations recognized as the international standard for regulating crypto assets. This begins with setting up KYC requirements, anti-money laundering and fraud prevention rules, and possibly sanctions screening controls.

FATF takes lead in crypto regulations

Likewise, FATF told Russian lawmakers to amend their proposed crypto bill, “On Digital Financial Assets” (DFA), which is already lacking major key concepts such as crypto mining, cryptocurrencies, and tokens. Instead, it uses different terms such as digital financial assets, including digital rights, as well as monetary claims and rights to equity securities.

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Back in the UAE, the FSRA has also overhauled current regulations to move the applicable rules on crypto firms from a bespoke category called “Operating a Crypto Asset Business,” to the respective underlying regulated activities. This would allow the regulator to classify crypto operations depending on their underlying nature rather than grouping the whole industry under a single headline. As such, blockchain start-ups could be recognized as providing custody, operating a multilateral trading facility, dealing in investments, etc.

The UAE has already taken steps to regulate the way that blockchain start-ups are raising money – initial coin offerings– though the nation’s regulators continue to warn of the many risks involved. The watchdog proposed a fit-for-purpose regulatory framework that effectively recognizes digital tokens as securities.

Under the guidelines, start-ups wishing to execute an ICO must approach the SCA to see if it falls under the body’s regulation. Also, market intermediaries and secondary market operators dealing with ICOs must be approved by the regulator. ICO operators will have to publish a prospectus, just like a firm would for an IPO on the stock market. And if an ICO has the characteristics of a security, such as giving a person ownership of shares in a company, then the SCA will regulate it.

In addition, Abu Dhabi’s financial regulator granted approval for Arabian Bourse, which allows the start-up to operate a full-fledged crypto-asset exchange and digital custodian in the emirate.

Currently, at the frontier of Fintech adoption, Saudi Arabia and the UAE have announced plans to launch a digital currency to serve both countries. Dubbed ‘Aber,’ it was announced in November on an experimental basis to facilitate financial settlements between the two Middle Eastern nations, which have a combined economy of over $1.2 trillion.

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