The Financial Services Regulatory Authority (FSRA) of Abu Dhabi has started to look into matters pertaining to cryptocurrencies and ICO and is thus issuing guidelines for the very first time. Abu Dhabi is not the first country to issue such guidelines as we have seen that in the past countries like China, South Korea and others have tightened up the screws with ICO regulations.
However, when it comes to dealing with ICO and cryptocurrencies, Abu Dhabi believes that it is “inappropriate” to treat both of them as one. The FSRA says that they ICO are similar to securities while the cryptocurrencies look more like commodities.
Such consideration by the FSRA of considering ICO as securities is because it allows investors to gain the ownership of shares within a company in exchange for digital tokens. In a word with Christopher Kiew-Smith, head of FinTech strategy at FSRA, said:
“The ICO market is incredibly diverse in terms of quality – there are some ICOs which constitute high risk. The disclosures are not there, there are no financial statements, so those are extremely high risk for those seeking returns. But we are aware of and are working with some firms that want to use ICO tech to fund in a transparent fashion. We have asked firms to bring them within the regulatory framework.”
This shows that for the ICO to go public, it must first approach FSRA and get itself approved of following all the regulatory guidelines. Just in case of an IPO in stock market, companies opting for ICO will have to submit a prospectus.
Richard Teng, FSRA executive director said:
“ICOs have transformed the capital formation landscape and global regulatory frameworks are evolving to adapt to such innovation. Participants exploring the issuance of ICOs that offer real value to the market and wish to operate within our regulatory framework are encouraged to engage us early to gain insights into the applicable regulatory regime.”
While working on the existing digital currencies, FSRA says that since cryptocurrencies are not a legal tender, it considers them similar to other commodities like fuels and metals which have its inherent value. FSRA says:
“Therefore from a regulatory perspective, virtual currencies are treated as commodities, which are not Specified Investments as defined under the FSMR. This means that a “mining” or spot transaction in virtual currencies will not constitute a Regulated Activity in itself.”
Bitcoins and Other Cryptocurrencies Can Still be Regulated in Future
Note that in spite of the fact the cryptocurrencies as being placed in the category of commodities, FSRA has not denied the possibility of they being regulated in the future. Abu Dhabi has recently signed a FinTech pact with Japan, pointing to which FSRA capital markets director Wai Lum Qwok said that they are currently in discussion with the Japanese counterpart Financial Services Agency about having regulations on Bitcoin. Wai Lum Qwak said:
“For us, we do see a lot of challenges in regulating something which was designed not to be regulated. We recently established a fintech reach with the Japanese FSA, and through such cooperation we hope to see how they regulate these and if there are risks they see.We are open to carving virtual currencies into the regulated space.”
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