SCA seeks industry feedback on crypto asset rules

The move from the UAE’s market regulator aims to further develop the nation's capital markets

The symbols of Bitcoin and Ethereum cryptocurrencies sit displayed on a screen during the Crypto Investor Show in London, U.K., on Saturday, March 10, 2018. The meeting is the largest crypto and blockchain event for investors in the U.K. Photographer: Mary Turner/Bloomberg
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The UAE's Securities and Commodities Authority is seeking industry and stakeholder feedback on the regulation of cryptocurrencies in the country, a move expected to further develop digital currency markets in the Arab world’s second biggest economy.

The UAE market regulator said it recently posted draft regulations concerning crypto assets on its website to obtain feedback from investors, brokers, financial analysts, researchers, media personnel and other relevant parties to help it finalise the wording of the new guidelines.

“Crypto asset regulations lay down standards and requirements for a wide range of market participants like issuers of securities, investors including qualified investors, custodians, crypto trading platforms, brokers and promoters engaged in [the] crypto asset industry,” the SCA said in a statement on Tuesday.

The regulations will encompass all aspects of the crypto asset industry in the UAE ranging from token issuance requirements to trading and safekeeping practices with an emphasis on protecting investor interests. It will also include financial crime prevention measures, information security controls and technology governance norms.

The SCA said it will take any feedback into consideration "when working on the final wording of the regulations", as the rules are currently in draft form.

Once the regulations are implemented, the SCA said it will be possible for market participants to request guidance on specific token issuance and regulatory requirements as part of an e-services system rolled out by the authority.

In February last year, the SCA issued a warning to investors against any fundraising in cryptocurrencies, whether through initial coin offerings,token pre-sale or crowd sales. The central bank of the UAE also warned against trading in cryptocurrencies, citing a risk of money laundering or terrorism funding as they do not go through official channels and cannot be monitored.

In September, the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) issued a set of guidelines for digital securities to support the development of crypto assets within the financial centre.

These provide a clarity on ADGM's regime following recent technological advances, focusing on initial offerings, listing, trading and custody of digital securities. The regulations also provide a "road map for entities to efficiently and smoothly migrate into conducting digital securities activities" within the centre, according to a statement from ADGM at the time.

The central banks of the UAE and Saudi Arabia are also working on a pilot project to launch a shared digital currency for facilitating cross-border bank transactions using blockchain technology.