The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has released the Consultation Paper No. 7 of 2024 containing proposals to enhance its regulatory framework to “allow the issuance of Fiat-Referenced Tokens (FRTs) from the ADGM and invites public feedback and comments on the proposals.”
FRTs are a category of stablecoins that are said to be “backed by high-quality, liquid assets denominated in the same currency as the FRT and that can be liquidated rapidly with minimal adverse price effect.”
FRTs are intended to be used as “a means of payment and share certain characteristics with Stored Value.”
Since the introduction of its original regulatory framework in 2018 for digital assets, the FSRA’s treatment of them has “evolved significantly to reflect advances in this area.”
While the most recent version of the FSRA’s ‘Guidance – Regulation of Virtual Asset Activities in ADGM’ (December 2023) discussed stablecoins in general and “distinguished them from Virtual Assets, the FSRA’s legislation will now specifically address FRTs and their issuance.”
The FSRA is proposing to adopt “a risk-based and proportionate approach to FRT issuance in response to industry demand, based on appropriate regulatory requirements that incorporate the necessary safeguards to ensure that FRT issuers operate in a safe and sound manner and informed by current practices in leading jurisdictions.”
Issuance of FRTs would constitute “a new Regulated Activity, distinct from the issuance of Stored Value within the Financial Services and Markets Regulations 2015 (FSMR), with commensurate conduct of business and prudential requirements.”
The consultation period will close “on 3 October 2024.”
To review the consultation materials check here: Consultation Paper No. 7 of 2024 – Proposed Regulatory Framework for the Issuance of Fiat-Referenced Tokens.
In other recent updates from the ADGM, it was noted that the international financial centre (IFC) of the UAE’s capital, continues its growth trajectory, reporting solid performance in the first half of 2024.
As the fastest-growing financial centre and the only jurisdiction with the direct application of the English Common Law in the region, ADGM’s achievements and initiatives are said to be a catalyst to “the growth of Abu Dhabi’s financial sector growth.”
The momentum of ADGM bolsters the financial sector’s contribution “to Abu Dhabi’s non-oil economy, which grew to 9.7% in Q1 2024.”
