Abu Dhabi’s financial regulator plans to regulate FRTs, a type of stablecoin, following demand from stakeholders. The regulator invited public feedback on the proposed regulatory framework.

Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA) has stated that FRT issuers will be subject to operational restrictions and requirements.

The FSRA proposed that the market value of reserve assets should be equal to or greater than the nominal value of all FRTs in circulation at the end of each business day. It was also stated that FRTs should be evaluated daily at market value.

The regulator also recommends that two or more FRT issuers establish separate pools of reserve assets for each FRT and manage each pool separately. ADGM’s regulatory proposal stated:

“FSRA welcomes interest from potential applicants planning to issue FRT from ADGM and this Advisory should be of particular interest to these individuals, other individuals and organizations active in the stablecoin industry, and their relevant professional advisors.”

FSRA set the deadline for comments on the proposal as October 3, 2024. Once comments are received, FSRA will consider whether changes to the proposed regulatory framework are required. ADGM’s board of directors and the FSRA will then promulgate the regulatory framework in its final form.

Taking into account definitions in other jurisdictions, the FSRA proposed to define an FRT as a digital asset in which transfer and storage are accomplished electronically using distributed ledger technology.

ADGM also proposed that the value of an FRT be referenced to a fixed fiat currency and that the holder be allowed to redeem the FRT from its issuer in exchange for that fiat currency upon request.

In addition to implementing a regulatory framework to govern the issuance of FRTs, the FSRA is reviewing the range of existing regulated activities and considering any relevant changes that could be carried out using FRTs.

The proposed changes will consider the acceptance of tokens for services or investments and the use of tokens in the provision of payment services. The proposal will be presented in a separate consultation document.

The United Arab Emirates (UAE) is increasingly perceived as a crypto-friendly destination due to its investment-friendly regulations and may be on its way to becoming a global crypto hub.

In May, crypto options trading platform QCP Capital received first-in-principle approval for regulated digital asset activities from ADGM. This made QCP the first Singapore-based crypto market maker and broker in the region.

In June, the Central Bank of the UAE approved a new stablecoin licensing and monitoring system with the aim of increasing digital transactions, developing the region’s digital economy and encouraging innovation.