The Registration Authority (RA) of Abu Dhabi Global Market (ADGM) has released a consultation paper suggesting a legal framework for Distributed Ledger Technology (DLT). The paper outlines proposals for DLT foundations, governance and control, tokens, token-holder voting, reporting and disclosures, beneficiaries, profit distribution, supervision, liquidation, voluntary strike-off, and insolvency. The ADGM is seeking public feedback on the proposals, with a deadline of May 12, 2023. After considering the feedback, the ADGM Board of Directors will then proceed to enact the final proposal.
The proposal suggests creating a standalone DLT foundations framework with a minimum initial asset value of $25,000. The document recognizes token holders’ legal status and advocates for decentralized governance with token-holders having the right to vote on certain matters. The proposal emphasizes transparency, fairness, and audited annual account submissions, but no specific marketing obligations are proposed. The Registrar will have the power to impose temporary prohibition orders on marketing on public policy grounds.
The new framework suggests that ADGM RA recognizes the suitability of foundation structures for DLT projects and is aligned with ADGM’s plan to support and foster crypto and DeFi-related developments.
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Significant strides
Abu Dhabi has been making significant strides toward embracing the world of cryptocurrency and blockchain technology. The ADGM’s recent proposal for a legal framework for Distributed Ledger Technology (DLT) is just the latest example of this push toward crypto adoption.
During Abu Dhabi Finance Week in November 2022, ADGM introduced the Abu Dhabi Crypto Hub, a web-based interactive platform that enables users to obtain information and engage with the virtual asset companies already present in the financial center.
In September 2022, the Financial Services Regulatory Authority (FSRA), the regulator of Abu Dhabi’s financial hub, published guiding principles on its approach to virtual asset regulation and supervision to outline its expectations for the asset class and service providers in the sector. The move comes as ADGM continues to attract several major companies dealing with cryptocurrencies to set up a base in its regulated financial-free zone.
In December 2022, the ADGM authorized the virtual asset trading platform Hayvn to operate under its regulatory framework.
In April 2022, the ADGM granted Kraken, one of the largest cryptocurrency exchanges globally, a regulatory license to run its virtual asset trading platform.
Furthermore, Binance, a blockchain services provider, received November 2022 approval from the FSRA to provide its services from the ADGM.
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