Amended ADGM rules on digital assets to cut approval time and attract institutional players

The changes by Abu Dhabi’s financial hub ADGM to its regulatory framework for digital assets will reduce approval time for tokens and also attract more institutional players, according to analysts.

The amendments streamline the process through which virtual assets (VAs) are accepted for use in the financial hub, said ADGM's regulator, the Financial Services Regulatory Authority (FSRA). They also impose appropriate capital requirements and fees for authorised persons conducting regulated VA activities.

The changes will lead to faster token approvals, since the process of adding new VAs to the ADGM’s “Accepted Virtual Assets” list has been streamlined, according to Nic Puckrin, crypto analyst and founder of The Coin Bureau, which publishes independent crypto-educational content.

“Previously, it was a lengthy and arduous process, but it will now take a lot less time, provided the token meets risk, liquidity and transparency standards,” he added.

The move signals the maturing of Abu Dhabi’s regulatory regime and its ambition to become a global hub for digital assets, said Devesh Mamtani, chief market strategist at Dubai-based Century Financial. These amendments also increase ADGM’s competitive standing relative to other financial centres like Dubai, Singapore and Hong Kong.

The amendments were implemented after “extensive” industry engagement and feedback, according to the FSRA.

Emmanuel Givanakis, chief executive of ADGM’s FSRA, said the changes mark a “significant milestone” in the evolution of its framework for digital asset regulation.

“We have further enhanced our framework to provide the regulatory certainty that industry participants need, while addressing the evolving risks of the digital asset ecosystem," he added.

Several global cryptocurrency players have sought to establish a foothold in the UAE amid the country's focus on the sector. ADGM has been able to attract some of the biggest names, such as eToro and M2, allowing these companies to operate as a broker for securities, derivatives and crypto assets, and platforms for institutional and retail investors to buy, sell and hold custody of virtual assets.

In December, the FSRA introduced a regulatory framework for the issuance of fiat-referenced tokens – a category of stablecoins backed by high-quality and liquid assets denominated in the same currency.

“The new amendments refine the institutional framework for digital asset companies entering Abu Dhabi and make it much simpler for them to quickly set up operations,” Mr Puckrin said.

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“The timing is particularly important as the US is stepping up its efforts to be a crypto-friendly jurisdiction and many crypto companies are either moving to the US or re-establishing their presence in the US," he said.

"So, if the UAE wants to compete, it has to step up, especially when it comes to attracting big institutional players. That means offering more clarity, which this updated framework appears to do, and allowing companies that meet the requirements to fast-track.”

However, he warned that the framework is still relatively rigid, so companies that fall outside of the box may still face delays and challenges.

The FSRA has also expanded the scope of regulated activities under the new Virtual Asset Regulatory Framework (VARF), which now includes virtual asset lending, borrowing and staking, activities that were previously unregulated, Mr Mamtani explained.

"By offering a clear regulatory pathway for these services, Abu Dhabi is likely to attract a wave of digital lending and staking projects and platforms looking for legal certainty and a supportive jurisdiction," he added.

The amendments also include revised capital requirements and adjusted regulatory fees to better reflect risk and activity type. This makes rules more consistent across the board and also ensures crypto companies have more buffer to account for potential risks, according to Mr Puckrin.

Mr Mamtani said the framework now introduces tiered capital thresholds based on the type and scale of services offered.

For instance, custody providers of virtual assets must hold either $250,000 in base capital or six months’ audited operating expenses. Multilateral trading facilities handling virtual assets are now required to hold six months' operational expenses plus any additional buffer.

Additionally, virtual asset service providers must now comply with enhanced custody and safeguarding rules, with a stronger focus on the segregation of client assets and technological risk management, Mr Mamtani said.

The amendments also introduce specific product intervention powers in relation to VAs. The FSRA now has formal authority to restrict or prohibit virtual asset products that pose undue risk to investors or markets.

In addition, privacy coins and algorithmic stablecoins remain explicitly prohibited from being listed or used in ADGM.

The amendments also expand the scope of investments in which venture capital funds may invest. ADGM-authorised VC funds can now invest more broadly in digital asset businesses, including infrastructure and services.

The move positions ADGM as one of the most “institutionally comprehensive” crypto regulators globally, Mr Puckrin said. This is part of Abu Dhabi’s broader strategy to attract institutional digital asset firms and tokenisation projects under “strong, rule-based supervision”, he added.