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ADGM Planning Regulations for Virtual Currencies

Abu Dhabi Global Market’s Financial Services Regulatory Authority is currently considering the development of a robust and risk-appropriate regulatory framework to regulate and supervise activities of virtual currency exchanges and intermediaries. The FSRA will be consulting and working with industry participants and relevant professional bodies.

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Prior to this, the FSRA had already issued a Supplementary Guidance on its regulatory approach to virtual currencies and Initial Coin/Token Offerings last October 2017. It sets 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. Furthermore, it advises caution to consumers seeking outsized investment returns from trading in virtual currencies due to their volatility.

Lastly, the FSRA recognizes that virtual currencies and ICO tokens do not always fit neatly into existing regulatory classifications, and welcomes engagement from the industry on the areas where the rules lack clarity.

This is in line with concerns that despite a lack of regulation, virtual currencies are increasingly gaining recognition as a medium of exchange for goods and services. The lack of legalities, as well as the anonymous and cross-border nature of virtual currency transactions, make the platform vulnerable to money laundering, terrorist financing, and other financial crimes. With these incidents currently on the rise, several regulators and anti-money laundering bodies in jurisdictions such as Australia, the EU, Japan, Singapore, and the UK have already introduced or proposed regulations that help mitigate these risks.

With more developments sure to be on the way, the FSRA reminds market participants using ICOs and virtual currencies to be cautious, and to approach them to discuss appropriate treatment within the regulatory regime.

Until further updates, the FSRA cautions market participants using ICOs and virtual currencies to approach them to discuss appropriate treatment within the regulatory regime.

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We are a consultancy based in the ADGM and the DIFC, in the United Arab Emirates.

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