The head of Abu Dhabi’s Financial Services Regulatory Authority (FSRA), Richard Teng, told attendees of Fintech Abu Dhabi that greater regulatory measures are needed in order to reduce the amount of fraud and scams that exist in the crypto markets. His comments come as global regulators work to clamp down on crypto related fraud.
Teng, the chief executive of the FSRA, spoke about crypto regulation while keeping in mind the potential growth of the industry, saying that “This space needs to be properly regulated, otherwise there is the risk of financial crime. Every time a coin gets stolen or lost, it affects the confidence in this asset class.”
Last year, the Abu Dhabi Global Market (ADGM) published a report offering prospective investors guidance on cryptocurrencies and initial coin offerings (ICOs) in an effort to educate investors on proper practices and the potential risks inherited by investing in a young and unregulated industry.
In addition to offering guidance to investors, the report also classified which regulatory framework virtual currencies fall under, specifically designating the tokens coming from ICOs as “special investments,” under the current framework. The report also notes that normal cryptocurrencies not acquired through ICOs are classified as commodities.
During an interview at the fintech event, Teng spoke about their current framework for cryptocurrencies and ICOs, saying:
“We are confident that our comprehensive regime – which we have shared with global regulators like the SEC [US Securities and Exchange Commission], the UK Treasury, Financial Conduct Authority and Bank of England, and regulators in Singapore, Hong Kong and Japan – can address these risks and bring greater confidence into this asset class.”
Global Regulators Working to Implement Crypto Regulations
Other global regulators are beginning to take actions to reduce the amount of fraud and scams that currently exist in the crypto markets. In the United Arab Emirates (UAE), their main regulatory body, the Securities and Commodities Authority (SCA), has approved a plan to regulate ICOs, treating them like security offerings.
The United States’ main regulatory body, the Securities and Exchange Commission (SEC), has also taken similar actions in regulating ICOs in particular. Recently, a US court designated ICOs as falling under security laws, which immediately led the SEC to shut down two unlicensed operations selling unregistered ICO tokens to investors.
The first company shut down by the SEC is TokenLot, a self-described ICO superstore, that allows investors to purchase and sell a variety of ICO tokens, many of which were deemed as securities by the SEC.
They also shut down a cryptocurrency hedge fund that was being marketed as being fully licensed and regulated and was operating as an unlicensed broker-dealer due to 40% of its investments being unlicensed securities.
Teng also added in his speech how important it is for regulators to create a safe investment environment for institutions:
“Once you bring them (institutions) into the market, you will see the prices become much less volatile, but institutions only come in if you help them address the risks,” he said.
Featured image from Shutterstock