New Regulatory Framework for Fiat-Referenced Tokens (FRTs)

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has issued Consultation Paper No. 7 of 2024, which outlines ideas to improve its regulatory framework to support the issuance of Fiat-Referenced Tokens  (FRTs).

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has issued Consultation Paper No. 7 of 2024, outlining proposals to enhance its regulatory framework to support the issuance of Fiat-Referenced Tokens (FRTs). This marks a significant step in the FSRA's efforts to bolster its approach to digital assets.

The consultation paper proposes the introduction of a new regulatory category for FRTs, distinct from other digital assets and stored value as defined under the Financial Services and Markets Regulations 2015 (FSMR). This tailored approach will ensure that FRT issuers are subject to specific business conduct and regulatory requirements.

FRTs, a type of stablecoin, are backed by high-quality, liquid assets in the same currency, allowing for prompt liquidation with minimal market impact. They are designed to function as a payment method and share characteristics with Stored Value.

The FSRA's proposed approach aligns with global best practices and industry standards, adopting a risk-based methodology to FRT issuance. This new regulatory category will provide specific business conduct and regulatory requirements to ensure that FRT issuers operate safely.

The FSRA invites public feedback on these proposals to establish a robust regulatory framework for FRTs, reflecting the rapidly evolving landscape of digital finance.

Meanwhile, Tether is set to launch a new stablecoin pegged to the United Arab Emirates Dirham (AED), in a move that aligns with the recent proposals from the Financial Services Regulatory Authority (FSRA) of Abu Dhabi for fiat-referenced tokens (FRTs).

These policies place an emphasis on transparency of reserve assets and independent token administration, reflecting the UAE's rapid growth in the crypto sector and its commitment to providing regulatory clarity.

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