Abu Dhabi Global Market’s (ADGM) financial services regulator has issued its first guidance on Initial Coin offerings (ICOs) and Virtual Currencies like Bitcoin, bucking the trend of regulators coming down hard on such tech-enabled financial instruments.
In a statement, the Financial Services Regulatory Authority (FSRA) said that ICOs represent “a novel and potentially more cost-effective way of raising funds for companies and projects.”
Noting that the form and quality of transparency of ICOs vary greatly from issuance to issuance, the FSRA stated that ICOs comprising tokens, which exhibit the characteristics of securities, will be treated as such within its regulatory framework.
As such, whether an ICO is to be regulated under FSMR will be assessed on a case-by-case basis, the FSRA said, as “a ‘one size fits all’ approach to ICOs would not be appropriate.”
“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,” said Richard Teng, chief executive director at the FSRA.
Issuing the guidance under its Financial Services and Markets Regulations (FSMR), the regulator also clarified that it would treat virtual currencies as commodities, and advised caution to investors looking for mega returns on such instruments.
The FSRA’s full approach to ICOs and virtual currencies is set out in the following link.
The ADGM’s approach to ICOs is in contrast to the regulatory approach in the recent past in other countries. While China banned ICOs and all cryptocurrency trading last month, South Korea banned domestic ICOs and margin trading in cryptocurrencies.