Abu Dhabi wants to be the next jurisdiction to regulate the trading of non-fungible tokens (NFTs), with one of its free zones proposing draft recommendations to police the burgeoning industry. The Abu Dhabi Global Market, a financial hub and free zone in the UAE city, released a consultation paper this week seeking to improve its…
Abu Dhabi desires to be the next jurisdiction to control the trading of non-fungible tokens (NFTs), with one of its complimentary zones proposing draft suggestions to authorities of the growing market.
The Abu Dhabi Global Market, a monetary center and complimentary zone in the UAE city, launched an assessment paper this week looking to enhance its monetary sector. Titled “Proposals for Enhancements to Capital Markets and Virtual Assets in ADGM,” the paper dove into securities trading, derivatives, sustainable financing, fundraising, and more.
On virtual properties, the paper kept in mind that the ADGM’s Financial Services Regulatory Authority (FSRA) has provided a regulative structure and it’s still imposing it. The company will be upgrading this structure to take account of modifications in the market.
The FSRA likewise acknowledged the growing significance of NFT markets within the broader digital property markets. It classifies them as “intellectual residential or commercial property rights over special developments” and declares that they are not themselves defined as financial investments or monetary instruments.
At present, the company is not proposing an official regulative structure for the sector. Yet, it’s open to NFT activities carried out within the free zone in specific scenarios, such as when a managed monetary entity wants to deal with NFT trading services. The FSRA is specific that such NFTs need to not relate to defined financial investments as that would locate them under existing monetary policies.
Financial entities that deal with NFT trading services need to likewise be mindful that such activities might trigger the need to follow the ADGM’s Anti-Money Laundering and Sanctions Rules.
Commenting on the propositions, the CEO of the ADGM Emmanuel Givanakis stated the complimentary zone had been looking at NFTs for the past 6 months.
“At this phase, the method we’re attempting to do it is to bring them into our environment. NFTs themselves are not monetary instruments – they’re equal to a piece of art. If there’s a derivative constructed around them, then yes, they end up being a monetary instrument,”Givanakis commented.
The terms come at a time when regulators have grown worried about the possibility of cash laundering through NFTs. With the sector being uncontrolled and being simple to control, bad guys can wash their cash while fabricating genuine trading.
According to New York-based Chainalysis, illegal activities on NFT markets leaped in2021 Funds from frauds accounted for the biggest share of unlawful funds in NFTs, with taken funds and from addresses that have approved likewise growing insignificance.
“Money laundering, and in specific transfers from approved cryptocurrency services, represents a big danger to structure a trust in NFTs and must keep an eye on more by markets, regulators and law enforcement,” Chainalysis composed at the time.