x Abu Dhabi, UAEMonday 18 December 2017

Abu Dhabi Global financial regulator sets out guidelines on initial coin offerings 

ADGM says initial coin offerings more cost-effective way of raising funds

Over the past year, the fin­ancial regulator has been boosting regulations at the ADGM to attract more businesses to set up shop in the freezone. Mona Al Marzooqi / The National
Over the past year, the fin­ancial regulator has been boosting regulations at the ADGM to attract more businesses to set up shop in the freezone. Mona Al Marzooqi / The National

Abu Dhabi Global Market’s fin­ancial regulator has set out guidance on initial coin offerings and virtual currencies that allow companies to take advantage of what it says is a more cost-effective way of raising funds.

“ICOs have transformed the capital formation landscape and global regulatory frameworks are evolving to adapt to such innovation,” said Richard Teng, the chief executive director of the ADGM.

“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 regimes.”

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The Financial Services Regulatory Authority said there is a need to provide guidance as virtual currencies are not strongly regulated and bringing transparency to the fast-growing area of finance is seminal to mitigating fraud.

Virtual currencies are treated as a commodity in the guidance laid out by the Financial Services Regulatory Authority. It also warned against investment by those seeking out-sized returns because of the volatile nature of virtual currencies like bitcoin.

ADGM’s financial regulator said that distributed ledger technology has a wide range of applications in financial services and markets as a whole and that it would regularly review and update its financial services rules and regulations.

Over the past year, the fin­ancial regulator has been boosting regulations at the ADGM to attract more businesses to set up shop in the freezone. In July, ADGM announced a landmark new arbitration hearing centre, alongside an agreement with the International Chamber of Commerce (ICC), marking a significant addition to the country’s legal infrastructure.

The ICC Court, which is ­headquartered in Paris, has administered disputes in a total of 23,000 international, commercial, business and investment arbitration cases since 1923. It is widely used in international transactions in the Middle East.

ADGM’s efforts in recent years to become an international finance hub of global standing have started to pay off. Last month, the ADGM rose three places to No 25 in the closely-watched Global Financial Center Index, compiled every six months by the market intelligence firm Z\Yen, which is based in London.

ADGM is also positioning itself as a hub for fintech institutions across the region, with the launch last year of its RegLab incubator programme for fintech entrepreneurs, and the FinTech Abu Dhabi Innovation Challenge for start-ups, in conjunction with KPMG.

The centre is hosting a major fintech summit on October 22 and 23.