The Financial Services Regulatory Authority (FSRA) has introduced a regulatory framework for the issuance of fiat-referenced tokens (FRTs) in ADGM, expanding the suite of digital assets that can be offered in a regulated environment.
The formalization of this framework follows extensive industry engagement and feedback received on a consultation paper released in August this year (Consultation Paper No. 7 of 2024).
The framework introduces several key components that establish robust standards for FRT issuers to ensure financial stability and investor protection. These include:
- Reserve assets: Minimizing the risks of variability in the value of FRTs by setting strict requirements on the constituents of reserve assets.
- Governance and integrity: Implementing periodic independent attestation and stress testing obligations.
- Transparent disclosure: Setting out requirements for detailed whitepapers and ongoing disclosures covering operational aspects, risks, and rights of FRT holders.
- Prudential safeguards: Setting clear capital adequacy requirements and business restrictions.
- Redemption rights: Ensuring FRT holder rights to redeem FRTs at par value within defined timeframes.
The framework makes FRT issuance a distinct regulated activity within ADGM’s comprehensive financial services regulatory regime. It has been designed to be risk-proportionate while ensuring FRT issuers operate in a safe and prudent manner. This balanced approach benchmarked against international standards and best practices, positions ADGM at the forefront of financial innovation.
Emmanuel Givanakis, CEO of ADGM FSRA, said: “Our FRT framework is a significant milestone in ADGM’s evolution as a progressive international financial centre. Through extensive consultation with industry stakeholders, we have created a regime that balances innovation with strong regulatory oversight. This framework provides the regulatory certainty that industry participants need while maintaining high standards of financial stability and investor protection. We believe this positions ADGM as a premier jurisdiction for responsible FRT issuance and shows our commitment to fostering responsible innovation in financial services.”
Strong Q3 results
Last week, ADGM announced another quarter of unprecedented growth, with exceptional achievements for the third quarter of 2024 across key metrics.
The results underscore ADGM’s pivotal role in Abu Dhabi’s strategic ambition to diversify its economy and solidify its position as a premier global destination for finance, investment, and innovation. ADGM continues to align with Abu Dhabi’s economic growth, which registered a 6.6 percent growth in non-oil GDP in the Q2 of 2024.
ADGM recorded a substantial increase of 215 percent in total assets under management (AUM) in Q3 2024 compared to Q3 2023, demonstrating its rapid ascent as a top asset management hub in the MENA region. This growth highlights ADGM’s ability to attract high-calibre asset managers, investment funds, and private equity firms, establishing it as a go-to location for institutional investors worldwide. This also reflects in the growth of the total fund and asset managers, which reached 128, managing 156 funds, as of the end of Q3 2024.
Risk management guidance
Last month, the FSRA released its Information Technology (IT) Risk Management Guidance, offering a thorough and integrated framework for addressing technology risks within ADGM’s financial services sector.
This guidance is the result of extensive collaboration with industry stakeholders, following the release of the FSRA’s Discussion Paper on IT Risk Management and an industry briefing conducted in February 2024. The FSRA received encouraging feedback from participants during this engagement, highlighting the relevance and importance of the guidance.
