When firms are considering setting up in one of the Free Zones in the UAE the decision comes down to their specific requirements and the type of business they would like to undertake. For those operating in the virtual asset space, Abu Dhabi Global Markets (“ADGM”) is currently the only option and their offering is proving to be very attractive.
The pace of virtual asset development and growth is causing regulators around the world to ask themselves what they should do with this new form of “asset”. The ADGM's regulator, the Financial Services Regulatory Authority ("FSRA") took the initiative by setting out its regulatory stance. Their innovative virtual assets framework meets both the demand from this developing industry as well as the need for consumer protection.
What does a Virtual Assets Licence Cover?
The regulations have been designed around the Virtual Asset Framework, with the virtual asset being treated as a “commodity” and, therefore, not deemed to be a “Specified Investment” under the FSRA’s Financial Services and Market Regulations. However, pursuant to the Virtual Asset Framework, market intermediaries dealing in or managing virtual assets (e.g. broker dealers, custodians, asset managers) and virtual asset exchanges will need to be licensed/approved by the FSRA as virtual asset licence holders, and only activities in accepted virtual assets will be permitted. If the applicant firm wishes to undertake business related to both virtual assets and other financial services, it will need to apply for those services in addition to the virtual asset licence.
What should you do now?
If you are considering making an application to the FSRA you should start discussions with them at an early stage and be prepared that the application process will require time, documentation and explanation until all concerned are comfortable that the business can “go live”.
We are experienced in supporting firms through this process. Should you wish to make an application, our team in the UAE are well positioned to assist you.