Abu Dhabi Global Market’s (ADGM) Registration Authority is proposing a legislative framework for distributed ledger technology (DLT), targeting disclosures, liquidation, and governance structures. The proposed “DLT Foundations Regulations 2023” aims to set up a tailored legislative framework that considers “features of foundations that might be attractive to developers of DLT projects,” which include decentralized autonomous organizations (DAO) – a favored governance structure for decentralized initiatives.
The proposal will also cover reporting, disclosures and publication, as well as insolvency and liquidation measures. This move by the ADGM is seen as a significant step in the direction of creating a more conducive regulatory environment for crypto and blockchain firms to operate in the UAE.
The proposed DLT Foundations Regulations 2023 will provide legal certainty, clarity and predictability to the DLT industry in the ADGM, creating a safe environment for DLT projects to grow and mature
Richard Teng, CEO of the Financial Services Regulatory Authority at ADGM.
UAE has been working to establish regulations that could attract blockchain and crypto firms to the region. The ADGM’s move comes after Dubai enacted a crypto regulatory framework on Monday, where they a unveiled federal licensing requirements for virtual asset service providers looking to operate in the country last week. The federal authority for securities in the United Arab Emirates has started accepting applications from virtual asset service providers (VASPs) since then. According to the announcement, all crypto companies must apply for approval with the Securities and Commodities Authority (SCA) to function in the country.
However, the service providers that are already licensed in the country’s financial free zones, such as the ADGM and Dubai International Financial Centre, need not do this. The UAE free trade zones extend facilities to non-resident corporations, like the convenience of single-window administration, and 100% ownership. There are about 44 free zones situated all over UAE that have attracted foreign direct investment in the form of 200,000 companies.
The ADGM’s proposed regulations could have a significant impact on the metaverse and the crypto sector. With more regulatory clarity, investors and entrepreneurs may be more willing to invest in DLT projects and establish blockchain-based businesses in the UAE.