ADGM, the international financial center of Abu Dhabi, and its Financial Services Regulatory Authority (FSRA) showcased a series of recent regulatory enhancements during Fintech Abu Dhabi, part of Abu Dhabi Finance Week (ADFW 2024).
The developments include a comprehensive framework for the issuance of Fiat-Referenced Tokens (FRTs) within ADGM, broadening the range of digital assets available in a regulated environment, the release of detailed guidance addressing IT Risk Management and a consultation paper on proposed updates to the Virtual Asset framework, further strengthening ADGM’s position as a leading hub for digital innovation and financial regulation.
Regulatory framework for FRTs
ADGM FSRA’s regulatory framework for FRTs supports their issuance, expanding the suite of digital assets within a secure and regulated environment. Developed following extensive industry consultations, the framework incorporates key components such as stringent reserve asset requirements, governance measures, transparency in disclosures, prudential safeguards and clear redemption rights for token holders.
By designating FRT issuance as a distinct regulated activity, ADGM FSRA’s framework ensures high standards must be met by those issuing FRTs, reflecting global best practices.
“ADGM’s advancement as a progressive international financial center is underpinned by the various and comprehensive initiatives it takes on the regulatory front. As a forward-thinking jurisdiction, every new regulatory framework and amendment introduced reflects ADGM’s and the FSRA’s commitment to staying ahead of the curve,” stated Emmanuel Givanakis, CEO of the FSRA of ADGM.
IT risk management guidance to enhance resilience
Meanwhile, the ADGM FSRA’s guidance on IT risk management enhances its regulatory approach by providing insights into what it considers to be critical aspects of sound and robust risk management in that area. It also highlights the importance of IT risk in business operations, introducing measures such as comprehensive, rules on standardized incident reporting, and the introduction of RegTech solutions. These measures aim to further enhance IT resilience and ensure adaptability to evolving technological and regulatory needs.
“We continuously assess and address the evolving risks as well as the needs of the digital asset ecosystem, as we remain committed to fostering responsible innovation within the financial landscape,” added Givanakis.
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Virtual asset acceptance guidelines
ADGM also announced a consultation paper, proposing amendments to the FSRA’s regulatory framework for Virtual Assets (VA) at ADFW 2024. These changes aim to refine processes for accepting VA within ADGM, further refine capital requirements and fees, and address emerging business models like staking.
The FSRA is seeking stakeholder feedback to ensure the framework aligns with industry developments while maintaining robust regulatory standards. The paper also invites input on criteria for accepting non-ADGM-issued Fiat-Referenced Tokens and proposes expanding investment opportunities for Venture Capital Funds.
The FSRA, through its regulatory approach, aims to balance innovation with strong regulatory oversight. The announcements at Fintech Abu Dhabi during ADFW 2024 received positive feedback from the delegates which included financial leaders, experts and executives, investors, entrepreneurs, and start-ups from the global and regional financial services industry.
