Abu Dhabi’s market regulator on Monday issued a consultation paper proposing a new set of rules to oversee spot crypto asset activities in the emirate.

Crypto assets, such as Bitcoin, saw a surge in popularity at the end of last year, but their activities are largely unregulated. The move by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) is part of a global push to rectify this.

The proposed new regulations will govern exchanges, custodians and other intermediaries and will help address issues such as anti-money laundering and counter-terrorist financing, consumer protection, technology governance and safe custody. The proposed framework will address the buying or selling of crypto assets, rules related to fees and introduce amendments to the FSRA Conduct of Business Rules, with a specific chapter on operating a crypto asset business.

In a press statement accompanying the news, Richard Teng, chief executive officer of the ADGM's FSRA, said: “By providing a best-in-class regime, this addresses concerns of regulators and investors alike, particularly institutional investors seeking to gain exposure to this asset class. Our proposed regulatory regime is only possible with our deep understanding and knowledge of the solutions available to address the respective risks and represents the most comprehensive regime proposed by global regulators so far.” (Read the full press release here).

The proposed new regulations are in addition to the FSRA’s Guidance on Initial Coin/Token Offerings and Crypto Assets released in October 2017. While crypto assets will continue to be treated as commodities from a regulatory policy standpoint, going forward, they will be subject to these new regulations, the press statement said.

The ADGM is inviting the public and industry participants to submit their comments on the proposed framework by 28 May 2018 emailing consultation@adgm.com. (Click here to read the consultation paper in full).

The news comes as cryptocurrency exchanges have seen major fluctuations in recent months. Average daily traded volumes fell to $9.1 billion in March and to $7.4 billion in the first half of April, compared with almost $17 billion in December, Reuters reported, citing data compiled by crypto analysis website CryptoCompare.

The biggest surge in activity was on December 22 when volumes topped $30 billion, according to CryptoCompare.

On April 8, volume sagged to $4.6 billion, the weakest day since last October, according to the data.

"[Bitcoin] needs a new narrative," Nicholas Colas, New York-based founder of investment research firm DataTrek, told Reuters. "There is every chance that if there is some sort of institutional involvement, there could be a move higher."

A Thomson Reuters survey last month found one in five financial institutions is considering trading cryptocurrencies in the next 12 months. Of those, 70 percent said they planned to start trading in the next three to six months. (Read the full results of the survey here).

Further reading:
• Abu Dhabi plans rules for spot crypto asset markets 
• Bitcoin heist: Dubai Police arrest 10, recover $1.9mln 
• Bitcoin frenzy settles down as big players muscle into market 
• Crypto trading tumbles as investment scramble unwinds 
• Crypto Billioinaires to gather in Dubai at Coinsbank event
• Nasdaq open to cryptocurrency exchange in future says CEO 
• Cryptorules: Central banks have limited power to influence traders on a blockchain system - experts
• Cryptic challenge: Who is the Saudi entrepreneur behind Dubai's new cryptocurrency exchange
• Mysterious, lucrative or risky: The pros and cons of trading in bitcoin
• Thomson Reuters finds one in five financial institutions are considering cryptocurrency trading in 2018

(Writing by Shane McGinley; Editing by Nada Al Rifai)
(shane.mcginley@thomsonreuters.com)

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© ZAWYA 2018