Abu Dhabi mulls cryptocurrency incubator lifeline
The regulator of Abu Dhabi’s international financial centre has said that it is considering creating new rules for exchanges handling virtual currencies that may allow trade in cryptocurrencies such as bitcoin to develop.
The FRSA which supervises the Abu Dhabi Global Market (ADGM), said that it considering whether to establish a framework for virtual currency exchanges, in a statement yesterday.
The Abu Dhabi regulator said: “The FSRA notes that virtual currencies, although not legal tender, are gaining interest globally as a medium of exchange for goods and services”, adding that it is reviewing and considering the development of a “robust, risk-appropriate regulatory framework” to regulate and supervise activities of virtual currency exchanges and intermediaries.
In considering such a framework, the FSRA said that it intends to consult and work closely with industry participants and relevant professional bodies. The move is a boost for under-fire cyptocurrencies such as bitcoin, particularly in the Middle East where other emirates and regions have criticised the rise of such investments.
As reported, in September last year, the Dubai Financial Services Authority, which regulates the Dubai International Financial Centre, issued a warned to investors to be cautious about dealing in cryptocurrency because they were not regulated.
In October, the UAE central bank said it did not recognise bitcoin as an official currency due to the risk of it being used in money laundering and terrorist financing. And last week the UAE’s securities regulator also warned about the risks of using cryptocurrency.
The FSRA’s statement, will therefore be seen as a much-needed boost prospect that cryptocurrencies could be positively endorsed by regulators, singling out Abu Dhabi’s ADGM as a potential hotspot for activity.
Elsewhere in the Gulf, the Saudi Arabian central bank has advised people not to trade bitcoin, and last week, Qatar’s central bank told banks not to deal in any way with cryptocurrencies. Bahrain has however created a “regulatory sandbox” in which companies can test digital currency technology and other financial innovations with a lighter regulatory touch.
‘Risks and concerns’
However, the Abu Dhabi regulator pointed that there are “risks and concerns”, the FRSA said, as given the anonymous and cross-border nature of virtual currency transactions, they are particularly vulnerable to money laundering and terrorist financing risks, as well as other financial crimes.
The FRSA said: “Incidents of cyberattacks and cybercrime are also on the rise. Several regulators and anti-money laundering bodies in jurisdictions including Australia, the EU, Japan, Singapore and the UK have introduced or proposed regulations to address such risks.
“Until further updates, the FSRA reminds market participants using ICOs and virtual currencies to approach FSRA to discuss appropriate treatment within the regulatory regime.”