Abu Dhabi regulator unveils 5 ‘guiding principles’ to control digital assets

The Financial Services Regulatory Authority (FSRA), the main financial watchdog of the Abu Dhabi Global Market free economic zone (ADGM), has revealed new principles to guide its control of virtual assets. The principles issued by the FSRA adopt an industry-friendly tone, hinting toward increased innovation in the sector.

Top of the list for the FSRA is the need to create a framework that is aligned with the best practices of international financial services globally. Thus, digital asset service providers can brace themselves to comply with internationally recognized financial reporting rules and abide by sanctions imposed on erring jurisdictions.

“ADGM’s rules and regulations will be principle-based and supplemented by specific and detailed rules, where appropriate, to guide market conduct and industry participants,” read the guidelines. 

To achieve this objective, the Authority says rules will be applied fairly and that experienced professionals “will deploy a wide range of appropriately calibrated regulatory solutions.”

As much as the principles pledge to be dynamic and innovative, there is a provision for “risk appropriate standards” to be adhered to. A consolidated approach will be adopted for financial institutions with several entities in their structure, while the interest of consumers will be given prominence above other participants.

The FSRA pledges to adhere to the principle of cooperation and shared responsibility without alienating the local characteristics of the UAE. The last arm of the guiding principles is its reaffirmation of delivering high standards of quality and service, and a resolve to punish firms violating the standards.

“When there is a breach of its rules and regulations, the Regulatory Authority will take immediate steps to mitigate any immediate risks of market contagion or unfavorable impact on consumers,” read the guidelines. “Detailed investigations will be conducted and disciplinary actions will be taken where warranted.”

The results of Abu Dhabi’s proactiveness

Abu Dhabi has emerged as the undisputed leader in digital assets within the Middle East, spurred by a wave of positive legislation. Dubai, the country’s economic hub, has seen Binance, FTX, and several digital asset exchanges set up operations in the country after being given licenses by the newly established Virtual Assets Regulatory Authority (VARA).

VARA was established by a sweeping legislature controlling digital assets in Dubai, which prohibits firms from carrying out virtual currency services without a VARA permit. Firms seeking a permit are expected to “establish a presence in Dubai,” and since the passing of the law, an avalanche of firms has poured into the region seeking permanent licenses.

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