Abu Dhabi is making rapid progress when it comes to blockchain and cryptocurrency sector. The main reason behind this growth is the massive adoption of digital payments, which has doubled in the last two years. Among various blockchain based-businesses in Abu Dhabi, one of the recent application is blockchain based platform for imports and exports as launched by the Abu Dhabi port. It is well known fact among blockchain and cryptocurrency experts that to launch a viable blockchain business or blockchain application, the most essential component is writing a high-quality crypto whitepaper. A thorough analysis of applicable blockchain laws and cryptocurrency regulations can reveal the required compliance as needed for launching a blockchain business in Abu Dhabi. In addition, launching a blockchain or crypto business in Abu Dhabi may require legal opinion letter to validate the business model or to determine if the crypto token qualifies as a utility token or a security token.
A centralized solution may be more beneficial for a company than a decentralized one. However, decentralized solutions are a better choice for innovative businesses that have many different partners and for companies interested in doing blockchain business in Abu Dhabi. A decentralized solution will allow all parties to maintain a single version of truth. The only downside is the lack of a centralized solution. It is still worth considering, though. The potential benefits of blockchain technology are huge. It can transform many industries, specifically based on business models that are innovative and possess global blockchain patents. Here are some of the ways it can help businesses today in Abu Dhabi.
Businesses can use blockchain to send and receive payments within the Abu Dhabi market to boost the Abu Dhabi fintech sector. This technology allows them to bypass financial intermediaries and avoid transferring funds through a third party. Although Ethereum and Bitcoin are popular cryptocurrency applications, the possibilities of blockchain for business are endless. According to Dr. Michael Yuan, Chief Scientist at CyberMiles, the future of the technology is not confined to cryptocurrency transactions. Its applications range from content distribution to healthcare data exchange to supply chain management, which will find numerous viable applications when it comes to startups in Abu Dhabi.
A blockchain allows businesses to send and receive payments and credit information without the use of expensive intermediaries. It is the backbone for all cryptocurrency transactions, and the potential applications for these technologies are nearly limitless. While these two technologies have already attracted attention, more widespread adoption of these technologies will make them more applicable to businesses across the board to achieve the desired business growth in Abu Dhabi.
In addition to cryptocurrency transactions, blockchain applications are also expanding into healthcare data exchange and peer-to-peer finance. In addition to cryptocurrencies, there are other business applications for blockchain, including supply chain management, customer service, and cybersecurity, which can provide an innovation-backed business model for companies in Abu Dhabi.
The Financial Service Regulatory Authority has amended its crypto asset framework and provided with the various new guidance. These guidance changed the terminology of “crypto asset to virtual assets” which helps in aligning with the Financial Action Task Force. The rules under the guidance are also changed to idiosyncratic nature from the Monolithic nature. The guidance is issued under the section 15(2) of the FSMR which are applicable to entities using “digital securities” within ADGM. They also help in clarifying the use of Digital Securities within ADGM for both primary as well as secondary market and provide clarity on licensing requirements for activities in relation to the virtual assets. The guidance is not an exhaustive source of FSRA’s policy and the FSRA is not bound by the requirements in guidance and may impose additional requirements or waive any rules relevant to the digital securities.
Whether an offspring of digital token is regulated under FSMR depends on the case by case basis. If token is assessed as economic or legal feature of security, the FSRA is deemed the token as a security pursuant and the same information shall be provided by the issuer in form of approved prospectus or Exempt offer to ensure the protection of investor.
Issuers are only allowed to make offer of securities if accordance with FSMR and MKT. In order to make Prospectus offer, application of approval of prospectus is to be filed at least 20 days prior to intended date (as per MKT rule). The format for approved prospectus is provided under APPENDIX 1 of MKT. In order to provide an Approved Prospectus, certain requirements like proper prospectus language, risk factor, responsibility, General information, actual and proposed business activities, Historical financial information, securities note and other rights.
Also, prospectus of FSMR does not apply to offer of securities to Public that constitute Exempt offer. The different types of Exempt offer are, an Offer is directed at Professional Clients rather than natural Persons, an Offer is directed at less than 50 Persons in any 12 month period, and, total consideration to be paid by a Person to acquire Securities is at least USD 100,000, or an equivalent amount in another currency.
Generally, issuers should consider appointment of suitable legal advisor for assistance throughout offer process. The FSRA is the only authority which is needed to maintain the Official List of Securities and neither RIEs nor any other reality within ADGM are suitable to maintain their own ‘Official List of Securities’. The FSRA’s nonsupervisory frame allows for Digital Securities to be offered, admitted to the Official List (maintained by FSRA) and traded on secondary markets within ADGM.
Investment Exchanges in Abu Dhabi
Recognized Investment Exchanges, or RIEs may operate both primary and secondary markets in Financial Instruments (including Digital Securities) and must demonstrate to the FSRA that it is able to meet the recognition Requirements as set out in Market Infrastructure Rules (MIR). Also, Multilateral Trading Facilities, or the MTFs may operate as a trading venue for Digital Securities offered and issued by way of an Exempt Offer, provided that membership and trading is limited to only non-retail clients.
In addition, Organised Trading Facilities provide the framework for OTFs that is similar as that of MTFs, but with certain differences. In choosing a RCH or DSF to utilise for custody operations or settlement a RIE or MTF can only use a RCH or DSF when the FSRA has been able to determine that the relevant settlement facility allows the RIE or MTF to meet the MIR.
Also, Recognized Clearing House or the RCHs operating in ADGM are permitted to settle different kinds of Financial Instruments. For the Digital Settlement Facilities, wherein the FSRA considers DSFs suitable for the purposes of settlement and custody of Digital Securities and also provide custody and settlement services in Digital Securities for RIEs and MTFs.
In use, MTFs using Virtual Assets can also apply to the FSRA for additional approval of trade Digital Securities. The MTF would therefore be able to have Digital Securities admitted to trading, where such Digital Securities were directly offered based on an Exempt Offer.
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Advocate Rahul Dev is a Patent Attorney & International Business Lawyer practicing Technology, Intellectual Property & Corporate Laws. He is reachable at rd (at) patentbusinesslawyer (dot) com & @rdpatentlawyer on Twitter.
Quoted in and contributed to 50+ national & international publications (Bloomberg, FirstPost, SwissInfo, Outlook Money, Yahoo News, Times of India, Economic Times, Business Standard, Quartz, Global Legal Post, International Bar Association, LawAsia, BioSpectrum Asia, Digital News Asia, e27, Leaders Speak, Entrepreneur India, VCCircle, AutoTech).
Regularly invited to speak at international & national platforms (conferences, TV channels, seminars, corporate trainings, government workshops) on technology, patents, business strategy, legal developments, leadership & management.
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Global Blockchain Lawyers (www.GlobalBlockchainLawyers.com) is a digital platform to discuss legal issues, latest technology and legal developments, and applicable laws in the dynamic field of Digital Currency, Blockchain, Bitcoin, Cryptocurrency and raising capital through the sale of tokens or coins (ICO or Initial Coin Offerings).
Blockchain ecosystem in India is evolving at a rapid pace and a proactive legal approach is required by blockchain lawyers in India to understand the complex nature of applicable laws and regulations.
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