Author – Sam Reads, UK
UAE’s Securities and Commodities Authority (SCA), the kingdom financial market watchdog and regulator issued an investor warning alarm, over-investment in initial coin offering (ICO). The investor alarm was published over the weekend warning investors about the risk associated with investing and fundraising ICOs in the country.
The English-Arabic circular stated that the most ICOs remain unregulated and are vulnerable to scams and fraud dealings. Most of the ICOs are issued abroad and are subject to foreign regulations and if the ICOs fail recovering investors’ funds will be difficult. Finally, the circular concludes that the information provided might be un-audited and misleading.
To empathize the point, the regulatory authority reminded its investors that cryptocurrencies and ICOs are unregulated and volatile and they don’t issue or recognize them by any legal means and investors are investing at their own risk. The SCA asked investors, digital token issuers, and intermediaries to seek legal and regulatory advice to make sure that they are in compliance with existing market regulations.
According to a CCN report last year, the Dubai Financial Services Authority (DFSA) stated that it does not regulate cryptocurrencies or license firms in the Dubai International Financial Centre (DIFC) To undertake crypto trading activities.
Abu Dhabi’s Cryptocurrency and ICO Regulations
The government released guidelines on digital currencies and initial coin offerings (ICOs). The FRSA stated that its stand on all blockchain solutions powered by crypto tokens is inappropriate and unchanged in the country.
Definition of ICOs and Securities
The FRSA guidelines state that ICOs are associated with high risk and diverse and involve unaudited information and financial statements. Therefore, companies willing to organize an Initial Coin Offering will be required to seek FSRA approval. The agency will then decide if the ICO falls under a security or outside a security definition. If the token falls out of the definition, the ICO will support its unregulated standard.
Cryptocurrencies Are Commodities
Similar to other financial watchdogs, Abu Dhabi’s financial watchdog stated that it does not recognize digital currencies as any form of legal tender and can only be categorized as commodities like precious metals, agricultural products, and fuels. The guideline also provides an Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) clause that requires all firms either using or facilitating digital currencies transactions will have to be compliant with.
Regulation of cryptocurrencies
The guidelines do not rule out a possible regulation of cryptocurrencies. However, the FRSA admits that regulation of digital currencies might become difficult as they were designed to be unregulated and uncontrolled by any government or state.
ICO and The world
UAE watchdog Securities and Commodities Authority (SCA), joins other regulators, policy makers and governments in warning its citizens about the risks related to ICOs and digital currencies investments.
