In outlining its intention to take a risk-sensitive approach, the FSRA said there were four “risk drivers” that it will give “heightened focus” to. One concerns the responsibilities of virtual asset custodians, even when they outsource activities to third parties. Another focus will be on firms’ technology and governance controls. The FSRA also intends to scrutinise whether firms are observing regulatory requirements when engaged in the exchange of virtual assets, and that it will also focus on ensuring there is compliance with rules designed to protect investors in virtual assets – including disclosure requirements.
The FSRA also highlighted its recent recruitment of a new supervisory team with experience in the virtual asset industry, which will inform its supervision of the market.
The new guide also confirms the FSRA’s commitment to delivering a robust, transparent and consistent regulatory framework for businesses engaged in virtual asset activities, to enforcing regulatory breaches, and to applying “high standards” in the authorisation process too.
It said: “This discerning approach is shown by the FSRA’s power to only permit VAs that it deems ‘acceptable’, as determined by risk factors such as security and traceability, in order to prevent the build-up of risk from illiquid or immature assets. For stablecoins, in addition to this requirement, we only permit those tokens where price stability is maintained by the issuer holding the same fiat currency it purports to be tokenising on a fully backed 1:1 basis. This therefore currently prevents the use within ADGM of other types of stablecoins, such as algorithmic stablecoins.”
The other regulatory principles the FSRA has communicated are focused on addressing the risk of money laundering and other financial crime in the virtual asset market, and on engaging with other financial authorities globally.
Though not legally binding, the principles, according to the FSRA, must be “viewed as a complement to the comprehensive detail of our published framework.”