Abu Dhabi Issues ICO Guidance

Announcements, ICO, Regulation | October 11, 2017 By:

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has released new guidelines on cryptocurrencies and initial coin offerings (ICO).

FSRA said that while ICOs represent a new way of raising funds, the transparency of ICOs varies greatly from issuance to issuance, and a ‘one size fits all’ approach to ICOs would not be appropriate.

The regulator said that it would apply existing anti-money laundering and know-your-customer (KYC) rules to token sales, classifying some as securities (depending on their makeup and underlying structure) and others as commodities. The agency added that it would weigh the sale and release of blockchain-based tokens on a case-by-case basis.

The FSRA said that companies that want to launch an ICO have to first check with the organization to see if it will fall under the watchdog’s regulation. Companies will also be required to publish a prospectus similar to those looking to sell stock via an initial public offering (IPO). Any middlemen looking to deal in ICOs need to have the approval of FSRA.

If a token issued as part of an ICO does not constitute an “offer of securities” it will remain unregulated. In such instances, the regulator said investors should exercise “extreme caution” before committing money.”

“ICOs have transformed the capital formation landscape and global regulatory frameworks are evolving to adapt to such innovation,” said Richard Teng, the chief executive director of the FSRA. “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.

The FSRA also said that cryptocurrencies are not legal tender. Instead, they are seen as “commodities” in the same vein as precious metals or fuels. Therefore, they remain unregulated.