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Abu Dhabi Started Working on ICO Regulation

By Ratko Stambolija
Published about 3 years ago

Abu Dhabi's Financial Services Regulatory Authority (FSRA), have recently released guidelines related to digital currencies and ICOs for the first time. Their stance on digital currencies is that they are seen as the commodities, while ICOs are characterized as similar to securities and risky.

Many countries are starting to work on regulations for ICOs, with different views and guidelines. Some countries, such as China, have decided to ban them, while other countries remain more friendly.

ICO Securities

Even categorizing ICOs, or branding them for that matter, differs from country to country. The United States and its SEC have said that ICOs have some features that classify them as securities, such as giving a person ownership of shares in a company.

The FSRA has noted these similarities to securities and has stated that if it decides to categorize ICOs as securities, it will regulate them in a similar fashion to a company issuing a new stock.

"The ICO market is incredibly diverse regarding quality - there are some ICOs which constitute a high risk," said Christopher Kiew-Smith, head of the fintech strategy at the FSRA. "The disclosures are not there, there are no financial statements, so those are an extremely high risk for those seeking returns."

"But we are aware of and are working with some firms that want to use ICO tech to fund in a transparent fashion. We have asked firms to bring them within the regulatory framework."

This means, similar to the SEC’s regulations, an ICO must approach the FSRA to check if it falls under their jurisdiction. Companies will likewise need to publish a prospectus, just like a company would for an initial public offering (IPO) on the stock market.

Cryptocurrency Commodities

The financial supervisor, the FSRA, also said it would not consider cryptocurrencies legal tender, but instead classify them as commodities, similar to precious metals or fuels. Which basically means they remain unregulated.

It is a big deal for cryptocurrencies that they are already established strong support, which leads to Abu Dhabi trying to bring the balance to this market with huge potential. They are looking to protect their citizens from the risks brought by ICOs while remaining open to letting the digital currency market flourish undisturbed.

Neighboring emirate Dubai, for instance, recently issued a warning about ICOs and stated they are not going to regulate them. Dubai has also released its own state digital coin.

Possible Regulations in the Future

The FSRA said that they are currently talking to the Japanese Financial Services Agency about the possible ways for regulating Bitcoin. Abu Dhabi's authorities stated they are not ruling out bringing digital currencies under its regulatory remit.

"For us, we do see a lot of challenges in regulating something which was designed not to be regulated. We recently established a fintech reach with the Japanese FSA, and through such cooperation we hope to see how they regulate these and if there are risks they see," said Wai Lum Qwok, executive director of capital markets at the FSRA.