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Abu Dhabi Regulator Launches Crypto Regulations in Financial Free Zone

Last Updated March 4, 2021 5:09 PM
Samburaj Das
Last Updated March 4, 2021 5:09 PM

The regulator for Abu Dhabi’s international financial center and free zone has launched its regulatory framework that will encompass spot crypto services offered by exchanges, custodians and other intermediaries in the area.

In a bid to foster a safer and thriving marketplace for cryptocurrency firms, the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) – the country capital’s international financial center and free zone – has established its ‘crypto asset regulatory framework’ for companies and firms operating in the zone. The launch follows a public consultation, the ADGM said in a statement  on Monday, with local and global respondents that led to ‘several refinements’ of the framework before its release.

An excerpt from the regulations [PDF] explains:

The FSRA has addressed issues around consumer protection, safe custody, technology governance, disclosure/transparency, Market Abuse and the regulation of Crypto Asset Exchanges in a manner similar to the regulatory approach taken in relation to securities exchanges globally.

Broadly, the FSRA has classified cryptocurrencies, or “crypto assets” as commodities. Security tokens issued will be subject to relevant regulatory requirements while ‘utility tokens’ will also be classified as commodities. Any derivatives or off-shoot funds related to crypto assets or tokens will also be regulated as ‘Specified Investments’ under the Financial Services and Markets Regulations.

How the FSRA views ‘digital assets’.


“We are encouraged by the significant global and regional interest from exchanges, custodians, intermediaries and other institutions to our crypto spot regulatory framework,” said FSRA of ADGM chief Richard Teng.

He added:

“Globally, responsible crypto asset players are seeking a regulatory regime upholding high standards that foster market confidence…Our engagement with fellow global regulators also validated our position that the key risks highlighted have to be addressed for crypto assets to be more widely accepted and institutionalised.”

Under the new regulations, operators looking to establish a new exchange will be required to be an initial authorization fee of $125,000 and an annual fee of $60,000. Crypto custodians like wallet firms will have to cough up $20,000 initially and $15,000 annually.

Described as a “key change” implemented after the public consultation, the regulator has also imposed a levy based on dialing trading on a sliding scale basis. For exchanges that see an average transaction value of less than $10 million, the levy imposed will be 0.0015%, up to $15,000 each month. On the other end, exchanges with an average daily value of over $250 million would minimally have to pay the FSRA a 0.0006% cut, a minimum of $150,000 per month.

Earlier in October, the government of Abu Dhabi published its guidance for initial coin offerings (ICOs) through the FSRA after deciding that a “one size fits all” approach to cover cryptocurrencies and ICOs would be “inappropriate”.

Elsewhere in Asia, the Philippines’ government has also embraced cryptocurrency exchanges and blockchain companies by legalizing the entry of 10 industry firms to operate in a state-controlled, tax-friendly economic zone.

Abu Dhabi skyline image from Shutterstock.