Regulatory authority of Abu Dhabi is commencing to regulate ICOs. It is the instantly growing way that cryptocurrency start-ups are raising money with the warnings of many risk involved.
According to data website,
“ICOs are a way for start-ups to raise money by issuing a new cryptocoin, while users pay them in bitcoin or Ethereum. It’s similar to crowdfunding but with digital money. This year, start-ups have raised $2.4 billion from ICOs”.
On Monday, for the first time, Abu Dhabi’s Financial Services Regulatory Authority (FSRA) have released guidelines on virtual currencies and ICOs.
The FSRA considers tokens offerings a “novel and potentially more cost-effective way of raising funds”. A head of fintech strategy at the FSRA, Christopher Kiew-Smith told CNBC,
“The ICO market is incredibly diverse in terms of quality, there are some ICOs which constitute high risk. The disclosures are not there, there are no financial statements, those are extremely high risk for those seeking returns. But we are aware of and are working with some firms that want to use ICO tech to fund in a transparent fashion. We have asked firms to bring them within the regulatory framework”.
The guidelines explain that, if a company wishes to execute an ICO must approach the FSRA. However, intermediaries or secondary market operators’ dealings with ICOs must be approved by the FSRA.
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Besides, some ICOs remains unregulated. For instance, if a token issued as part of an ICO does not constitute an “offer of securities” it will remain unregulated. Considerably, FSRA also warned investors of price volatility, noting the tendency for speculation in the hopes of outsized returns.
In August 2017, Abu Dhabi Global Market partnered with UAE Exchange to engage startups for participation in its regulatory lab. Therefore, regulators of Abu Dhabi appear to find the right balance to the growing cryptocurrency world.
“We are trying, like most regulators, to remove disproportionate barriers to sensible innovation. The ICO tech, when used appropriately and in a regulated fashion, can be a good innovation”.