Regulatory authorities in Abu Dhabi have proposed a legislative framework to bring order to the crypto asset markets in the region, including new rules governing exchanges, custodians and other intermediaries.
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), but formal rules have yet to be agreed, increasing confusion for would-be investors from the financial markets.
The UAE's financial sector regulator ADGM is seeking to address the issue by defining crypto asset exchanges as market infrastructures and proposing a raft of new measures to cover key risks including anti-money laundering and counter-terrorist financing, consumer protection, technology governance and safe custody.
The body says that a fair, credible and effective regime will enable participation not only from retail and accredited investors that are active in seeking exposure, but "facilitate participation from institutions and corporates that have been largely absent due to inability to address the risks involved".
Richard Teng, chief executive officer of ADGM, says: “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."
The proposed framework supplements the previous guidance on Initial Coin/Token Offerings, which are currently treated as securities under ADGM rules. Crypto assets, while continuing to be treated as commodities from a regulatory policy standpoint, will be subject to the new regulatory framework.
ADGM is seeking feedback from market participants on the proposals, with a deadline of 28 May for all submissions.