In a move to meet market demand, Abu Dhabi’s financial regulator is proposing a framework to oversee stablecoins.
Abu Dhabi’s financial regulator is stepping up to oversee fiat-referenced tokens (FRTs), a type of stablecoin, following increasing interest from stakeholders keen on their issuance.
In the latest crypto news, the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) has opened the floor for public feedback on a proposed regulatory framework designed to govern these digital assets.
Under the proposed guidelines, FRT issuers will face specific operational restrictions. One key requirement is that the market value of reserve assets must at least match the par value of all FRTs in circulation by the end of each business day, with valuations conducted on a mark-to-market basis daily.
The FSRA is responding to interest from potential applicants seeking to issue FRTs from ADGM, and this Consultation Paper should be of particular interest to them, other individuals and organizations active in the stablecoin industry, and their respective professional advisers.”
Moreover, issuers managing two or more FRTs would need to maintain separate pools of reserve assets for each token, ensuring each is independently managed.
In crypto news today, the FSRA has set an October 3, 2024 deadline for public comments on this proposal. After reviewing the feedback, the FSRA will decide whether any adjustments are needed before finalizing the regulatory framework.
In defining FRTs, the FSRA looked at other jurisdictions and proposed that an FRT be recognized as a digital asset whose transfer and storage are facilitated electronically using distributed ledger technology. The value of an FRT would be pegged to a fixed amount of a single fiat currency, allowing holders to redeem their FRTs for the equivalent amount of that currency from the issuer on demand.
In addition to establishing a regulatory framework for FRTs, the FSRA is reviewing its existing suite of regulated activities to determine if amendments are necessary to accommodate FRT usage. These changes could involve accepting tokens for services or investments or using tokens for payment services. A separate consultation paper will be released to address these potential amendments.
