Abu Dhabi Creates ‘Guidance’ for Handling Cryptos

The regulator of Abu Dhabi’s international financial center announced that they will be creating new rules for exchanges handling virtual currencies that are allowing trade in cryptocurrencies.

It’s important to mention that The FSRA first issued a “Guidance” on its regulatory approach to ICOs and virtual currencies under the Financial Services and Markets Regulations (FSMR) back in October 2017.

The Guidance confirms that ICOs comprising tokens which exhibit the characteristics of Specified Investments shall be regulated as such within FSRA’s regulatory framework. It also set out that virtual currencies are treated as commodities, where the derivatives trading of virtual currencies is regulated under the FSMR while spot trading of virtual currencies is not.  Of course there was a caution advised, to consumers seeking bigger investment returns from trading in virtual currencies due to their price volatility.

The FSRA noted that virtual currencies, although not legal tender, are gaining interests globally as a medium of exchange for goods and services.  “However, there are risks and concerns.  Given the anonymous and cross-border nature of virtual currency transactions, they are particularly vulnerable to money laundering and terrorist financing risks, as well as other financial crimes.  Incidents of cyberattacks and cybercrime are also on the rise.  Several regulators and anti-money laundering bodies in jurisdictions including Australia, the EU, Japan, Singapore and the UK have introduced or proposed regulations to address such risks,” the Guidance stated.

Like its oponnents in other countries and regions such as Japan, the EU and Singapore, the FSRA said it’s also exploring a framework to supervise cryptocurrency exchanges regarding these risks.

Just for a reminder, in October last year, FSRA said 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. They explained that they are encouraging those using ICOs to approach it as early as possible to determine the appropriate treatment within the regulatory regime.

The ICO market is incredibly diverse in terms of quality, there are some ICOs which constitute high risk,” Christopher Kiew-Smith, head of fintech strategy at the FSRA then said. “The disclosures are not there, there are no financial statements, those are extremely high risk for those seeking returns.”

Teuta Franjkovic

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