ADGM regulator sets out reform agenda through 2027

The developments, provided during a recent policy and legislative update session, come as the ADGM continues to expand, with the FSRA reporting that more than 410 financial institutions are now authorised in the financial centre and approximately 160 additional firms are seeking to establish operations.

Among the most significant announcements was the FSRA's finalisation of reforms to the ADGM funds framework, introducing two new categories of fund managers that will be subject to streamlined regulatory requirements.

Under the reforms, sub-threshold fund managers overseeing up to US$200 million of committed capital and managing only closed-ended exempt funds or Qualified Investor Funds or their foreign equivalents, which do not act as host fund managers, will benefit from a simplified authorisation process, lower capital requirements and certain exemptions from control function requirements. Venture capital fund managers are expected to be among those able to take advantage of the new regime.

A second category covering institutional fund managers managing funds with a minimum subscription of US$5m and no investment from natural persons will also benefit from streamlined and lighter touch regulatory requirements and an exemption from professional indemnity insurance obligations.

Marie Chowdhry, a financial services regulatory expert at Pinsent Masons in the UAE, said: “The introduction of these categories demonstrates the FSRA’s willingness to calibrate regulation according to the nature of the investors and funds involved. For venture capital managers and other institutional-focused firms, the changes have the potential to reduce regulatory costs and barriers to entry while maintaining appropriate safeguards.”

The FSRA also revealed plans to publish a much-awaited consultation with guidance on its approach to DeFi in October, with the final DeFi guidance expected to be published during the first half of 2027.

Rather than creating a dedicated regulatory framework for DeFi or directly regulating protocols, the FSRA said it intends to clarify how existing regulatory requirements apply when authorised firms engage with DeFi-related activities.

The proposed guidance will be principles-based and technology-neutral. The FSRA said it would be requiring firms to ensure that DeFi activities fall within the scope of their existing permissions and are supported by appropriate governance arrangements, risk assessments, exposure limits, monitoring processes and record-keeping measures.

Jessa White, a financial services regulatory expert at Pinsent Masons in the UAE, said: “The FSRA appears keen to provide greater certainty for regulated firms exploring DeFi-related opportunities while avoiding overly prescriptive rules. The focus instead is on ensuring firms can demonstrate that existing governance, risk management and compliance frameworks remain effective when applied to emerging technologies.”

The update session also highlighted the continued maturation of the digital assets sector.

According to the FSRA, supervisory focus is increasingly shifting beyond traditional concerns around cryptoasset price exposure and custody, towards areas such as stablecoins, tokenisation and yield products.

The regulator identified its staking framework and work on fiat-referenced tokens as important recent developments, while reaffirming that perimeter clarity, custody standards, anti-money laundering and counter-terrorist financing controls, technology risk management and market conduct remain regulatory priorities.

Chowdhry said: “As institutional participation in digital assets continues to grow, regulators are increasingly required to address more sophisticated use cases. The FSRA’s focus on staking, tokenisation and stablecoin-related activity reflects how quickly the market is evolving beyond the earlier questions of custody and trading.”

Looking further ahead, the FSRA outlined an extensive 2027 regulatory agenda.

Among the planned reforms are proposals to bring virtual assets within the definition of specified investments, consideration of the use of digital assets as collateral for credit exposures, and potential work on prediction markets.

The FSRA also plans to continue its reviews of the insurance and funds sectors, advance work on operational resilience and business transfer schemes, and strengthen its frameworks for consolidated supervision and recovery and resolution planning for banking and insurance firms.

Retail investor protections are expected to be enhanced through new appropriateness requirements for execution-only services and improvements to complaints resolution mechanisms.

In addition, the FSRA confirmed plans to revisit prudential requirements for Category 2 and Category 3 firms and introduce minimum certification requirements for money laundering reporting officers, compliance officers and other key control function holders.

The updates form part of the FSRA’s broader objective of supporting innovation while safeguarding market integrity and come as preparations continue for the UAE's forthcoming International Monetary Fund financial sector assessment programme review.