The financial regulator of the Abu Dhabi Global Market (ADGM) published some guiding principles on its approach to virtual asset regulation and supervision.
The guidelines laid out by the Financial Services Regulatory Authority (FSRA) cover the following broad areas: a robust and transparent regulatory framework; high standards of authorisation; preventing money laundering and other financial crimes; risk-sensitive supervision; enforcement powers for regulatory breaches; and its commitment to international cooperation.
Emmanuel Givanakis, CEO of FSRA, said: “These guiding principles will provide greater clarity to investors, other regulators, industry and the wider public of our approach to regulation in this area and key expectations we have set on current virtual asset service providers in ADGM and potential applicants. They also outline the tools we have at our disposal to mitigate the material risks that are born from these activities and the regulatory powers to identify and act upon any misconduct. Consistent with the FSRA’s broader strategy to align with international best practices, these principles make clear the high standards of our framework at a time of increased volatility and regulatory focus.”
Preventing money laundering
The FSRA requires that its comprehensive Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) rules are equally applicable to virtual asset activities, in addition to UAE-wide Federal Laws and Cabinet Resolutions on AML/CFT. The FSRA also expects full compliance with FATF guidance and recommendations in this area.
If an applicant’s business model and controls are deemed to be within the FSRA’s risk appetite and they meet all applicable rules and requirements, they can obtain an ‘in-principle’ approval. This outlines conditions that are required to be met prior to granting the applicant the appropriate Financial Services Permission. An applicant will only progress to a launch when it has completed its operational testing to the FSRA’s satisfaction, which may include third-party verification of the applicant’s systems.