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Abu Dhabi, UAEWednesday 19 December 2018

ADGM launches financing framework to support start-ups

And UAE’s Securities and Commodities Authority approves plan to regulate initial coin offerings

ADGM launched new regulatory framework for private financing platforms that back start-ups and smaller enterprises. Mona Al Marzooqi / The National
ADGM launched new regulatory framework for private financing platforms that back start-ups and smaller enterprises. Mona Al Marzooqi / The National

Abu Dhabi Global Market, the capital’s financial free zone, launched a new framework to regulate operators of private financing platforms that serve start-ups and small enterprises.

These regulations require the operators to have systems and controls regarding due diligence on listed enterprises, risk disclosures, safeguarding of client assets, anti-money laundering and counter-terrorist financing, ADGM said yesterday.

“As an international financial centre, ADGM continuously enhances and strengthens its offerings and regulatory regime to meet fast-evolving needs of local and international economies,” said Richard Teng, chief executive of the Financial Services Regulatory Authority in ADGM.

Start-ups as well as small and medium enterprises are typically the backbone of most economies.

They are a way for the oil-rich Arabian Gulf countries to diversify from a reliance on petro-dollars. Abu Dhabi and Dubai have developed several initiatives to support the growth of start-ups, particularly in the area of financial technology, as the UAE focuses on a knowledge-based economy.

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The ADGM framework will regulate operators of private-financing platforms serving equity investment, debt financing and trade receivables funding needs of start-ups, private enterprises and SMEs.

Online financing platforms enable start-ups and SMEs to obtain funding from private and institutional investors to grow their businesses.

Earlier this week, the UAE’s Securities and Commodities Authority approved a resolution to regulate initial coin offerings and recognise them as securities, reported state-run news agency Wam.

ICOs are a type of crowdfunding using cryptocurrencies. A cryptocurrency is sold in the form of “tokens” (coins) to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum.

The resolution will come into effect after it is published in the UAE’s Official Gazette.

The SCA board reviewed a study on the best international practises for ICO trading before issuing a directive regulating trading procedures.

The move comes as part of an integrated project to regulate digital securities and commodities, Wam said.

In February, the SCA issued a warning to investors against using ICOs amid a sharp decline in the value of cryptocurrencies at the time.