The Financial Services Regulatory Authority (FSRA) of Abu Dhabi has just released a set of rules and guidelines on digital currencies for the first time ever. The guidelines also apply to ICOs where they take a similar approach to securities. The FSRA considers ICOs to pose a level of risk, but the FSRA deems that digital currencies should be treated in much the same way as regular commodities.
Governments and financial regulators around the world are currently cracking down on ICOs with China banning them altogether a few months ago. It would appear the regulators in Abu Dhabi plan to take a slightly more friendly approach than some other nations.
To the joy of many users and investors, the FSRA will not class digital currencies as legal tender under the new regulations. Instead, the official body will treat them in the same manner as precious metals, oil, and other commodities. That means that, for the most part, the marketplace will remain unregulated at the current time. For established cryptocurrencies, that’s a fantastic revelation, and it means that unlike many other countries at the moment, Abu Dhabi aims to strike a balance that enables them to thrive.
While the goal is to protect residents and citizens from the risks involved with ICOs, the country is taking a forward-thinking stance when it comes to cryptocurrencies, and the FSRA is essentially encouraging their use.
Different countries choose to brand Crypto ICOs and categorise them in various ways. China made a point of banning them altogether recently, but most nations like the US treat ICOs like commodities. The FSRA says that ICOs are similar to securities in many ways, and so they plan to categorise them as such. With any luck, that will mean the regulations will be identical to those placed on businesses releasing a new stock onto the market.
The head of fintech strategy at the FSRA said: “The ICO market is diverse regarding quality. However, there are some ICOs which constitute high-risk.”
He went on to say “The disclosures are not there, there aren’t any financial statements, and that means they are extremely high-risk. That said, we are aware of some firms that want to use ICO technology to fund in a transparently and openly.”
Potential for future cryptocurrency regulations
The FSRA isn’t ruling anything out when it comes to the possibility of regulating digital currencies in the future. Indeed, the Authority made contact with their Japanese counterparts to discuss their approach only recently. Bitcoin is growing in popularity every single day, and so there is a reasonable chance Abu Dhabi will implement some new rules and guidelines at some point. However, right now, cryptocurrencies are not under the group’s regulatory remit. Will that change during the coming years? Almost certainly.
Abu Dhabi is taking a cautious approach to all of the issues mentioned in this article, and so it’s sensible for everyone to keep their eyes peeled for more revelations. For now, at least, the country appears to be moving in the right direction.