Abu Dhabi Global Market mulling virtual currency regulatory framework
ADGM set out guidance on initial coin offerings in October
The regulatory arm of the Abu Dhabi Global Market, the emirate's financial centre, said it is considering a governing framework to supervise virtual currency exchanges and is in consultations with industry participants to chalk it out.
"The FSRA notes that virtual currencies, although not legal tender, are gaining interests globally as a medium for exchange for goods and services," ADGM said in a statement on Sunday.
"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 finance risks, as well as other financial crimes."
The announcement follows preliminary guidance on initial coin and token offerings that the Financial Services Regulatory Authority made in October.
The FSRA echoed concerns made by the UAE's Securities and Commodities Authority last week. The country's markets regulator issued a warning to investors against using initial coin offerings amid a sharp decline in the value of cryptocurrencies.
The SCA warned investors against any fundraising done through cryptocurrencies, be it ICOs, initial token offerings, token pre-sale or token crowd-sale, it said in a statement on its website.
ICOs are used by companies to raise funds whereby a company sells shares to the public in a fiat currency and lists it on a stock exchange. Many regulators around the world have issued warnings to investors after instances of fraud in the ICO market.
In 2017, some $6 billion was raised in ICOs, according to Cointelegraph, a cryptocurrency news website.
In October, the FRSA set out guidance on ICOs and virtual currencies to allow companies to take advantage of what it says is a more cost-effective way of raising funds. Virtual currencies are treated as a commodity in the guidance laid out by the FSRA.
Updated: February 11, 2018 03:05 PM