Abu Dhabi Global Market Financial Regulator Unveils ‘Guiding Principles’ for Virtual Asset Regulation CryptoGlobe

Abu Dhabi’s global market financial regulator, the Financial Services Regulatory Authority (FSRA), recently unveiled six principles that will guide its “approach to the regulation and supervision of virtual assets”. Although not legally binding, the principles, according to the FSRA, should be “considered as supplemental to the full details of our published framework.”

A “basis for regulatory cohesion between jurisdictions”

Abu Dhabi Global Market (ADGM), a financial center and global free zone based in the United Arab Emirates (UAE), recently unveiled six guiding principles for the regulation and supervision of virtual assets. The principles, which were announced by its financial sector regulator, the Financial Services Regulatory Authority (FSRA), aim to “support engagement with other like-minded regulators within and outside the United Arab Emirates”.

Although not legally binding, the principles, according to the FSRA, should be “considered as supplemental to the full details of our published framework.” According to the regulator, the six principles are potentially the basis “for regulatory cohesion between jurisdictions”.

In addition to “providing an accessible view” of FSRA’s priorities in this area, the principles are also a manifestation of the regulator’s risk appetite in areas related to regulation.

“Each principle is a statement of the FSRA’s risk appetite in the areas of regulation,
authorization, financial crime, surveillance, enforcement and international cooperation. Taken holistically, these expectations are calibrated to ensure an appropriate balance between trust in our ecosystem, risk sensitivity, customer protection and attraction of new entrants,” the regulator explained.

High authorization standards

As shown in the document outlining the key attributes of each virtual asset regulatory approach, the FSRA’s number one principle calls for the creation of a “robust and transparent risk-based regulatory framework”. Such a framework should, on the one hand, “introduce a clear taxonomy defining VA (virtual assets) as commodities within the broader universe of digital assets and require licensing of entities engaged in regulated activities that use VAs within the ADGM”.

On the other hand, the same framework should give licensed virtual asset entities the “same regulatory status within ADGM as any other licensed entity.”

Meanwhile, the second principle calls for maintaining high standards when granting permission. The prevention of financial crimes and money laundering is another key factor that should guide the regulation of virtual assets, says the FSRA. A commitment to use enforcement tools in cases where authorized entities breach regulations is another principle that should guide regulators.

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively on the economic issues of some African countries as well as how digital currencies can provide an escape route for Africans.

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