FSRA chief calls for tougher rules on crypto trading
Tighter international regulation is needed for cryptocurrency trading to mitigate financial crime, said the head of the Abu Dhabi Global Market’s Financial Services Regulatory Authority.
ADGM last year published guidance on virtual currencies and initial coin offerings – the digital currency version of public share listings – following widespread criticism of the industry and extreme volatility in the trading prices of popular cryptocurrencies such as Bitcoin.
“This space needs to be properly regulated, otherwise there is the risk of financial crime,” said Richard Teng, chief executive of the FSRA. “Every time a coin gets stolen or lost, it affects the confidence in this asset class.”
ADGM was the first GCC financial centre to issue guidance on virtual money. The document clarifies how and for whom ICOs can be used to raise funds and states that the virtual “tokens” offered for sale in ICOs should be treated as “special investments” under ADGM’s regulatory framework. Virtual currencies, on the other hand, should be treated as commodities, it adds.
“We are confident that our comprehensive regime – which we have shared with global regulators like the SEC [US Securities and Exchange Commission], the UK Treasury, Financial Conduct Authority and Bank of England, and regulators in Singapore, Hong Kong and Japan – can address these risks and bring greater confidence into this asset class,” Mr Teng said during the FinTech Abu Dhabi event this week.
While the rapid rise of cryptocurrencies has captured the world’s attention, many analysts and regulators have warned investors to be careful, claiming it is a bubble waiting to burst and citing lack of global regulation.
Jim Yong Kim, the head of the World Bank, compared cryptocurrencies to illegitimate “Ponzi schemes” in February.
Last week, the MVIS CryptoCompare Digital Assets 10 Index extended its collapse from a January high to 80 per cent. The fall exceeded the Nasdaq Composite Index’s 78 per cent peak-to-trough decline after the dot-com bubble burst in 2000.
Many regulators have issued warnings to investors after instances of fraud and misleading offers in the ICO market. In 2017, aobut $6 billion was raised in ICOs, according to Cointelegraph, a cryptocurrency news website.
Regulators, including the Central Bank of the UAE, are regulating digital money as the market grows. Despite issuing previous warnings, the UAE Securities and Commodities Authority this month approved a plan to regulate ICOs and recognise them as securities, according to a statement from SCA chairman and Minister of Economy Sultan Al Mansouri.
The announcement came after the SCA undertook a study on best practices. Mr Teng said “a lot has changed” recently in terms of cryptocurrencies, and that rules must be developed accordingly.