ADGM launches framework to govern spot crypto assets

Move is a step towards developing a safer marketplace for digital currencies in the capital's financial hub

Abu Dhabi Global Market and Hong Kong Monetary Authority will jointly promote financial technology prospects and opportunities. Mona Al Marzooqi / The National

Abu Dhabi Global Market has launched the framework to regulate spot crypto asset activities, a step towards developing a safer marketplace for digital currencies in the capital’s international financial centre.

The regulations to govern the digital assets will oversee activities undertaken by exchanges, custodians and other intermediaries, ADGM said in a statement on Monday. The move is part of ADGM’s efforts to help diversify economy of Abu Dhabi, home to about 6 per cent of the world’s proven oil reserves, and develop the financial services sector in the emirate.

“We are encouraged by the significant global and regional interest from exchanges, custodians, intermediaries and other institutions to our crypto spot regulatory framework,” Richard Teng, chief executive of ADGM, said. “By introducing a comprehensive and best-in-class regulatory framework, the FSRA [Financial Services Regulatory Authority] is taking a leading role in instilling proper governance, oversight and transparency over crypto asset activities, positioning ADGM as a destination of choice for crypto asset players.”

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The dramatic growth of digital asset and crypto asset markets has disrupted and transformed the financial services industry. Initially intended as a medium of exchange requiring no central counter-party, crypto assets such as Bitcoin have evolved to become alternative investments for investors seeking returns in this asset class.

The ADGM’s regulatory framework is designed to address the full range of risks associated with crypto asset activities, including risks relating to money laundering and financial crime, consumer-protection technology governance, custody and exchange operations.

The launch follows completion of one-month public consultation on crypto asset regulatory framework initiated by the FSRA, the regulator of ADGM.

The public feedback has been “very positive”, and key changes such as the daily value trading levy imposed on crypto asset exchanges on a sliding scale basis, have been introduced following the public consultation, ADGM said.

By and large, institutional investors have steered clear of investments in highly volatile virtual currencies and it has been a domain for mostly retail investors.

"You need to bring in the institutional investors and to do that you need to address the risks properly and that's what we are trying to do [with the regulations]," Mr Teng told The National in an Interview last month in Beijing. "Only then you will see more stability in the price [of crypto assets]."