ADGM Seeks Feedback on Decentralized Economy Proposal
The Registration Authority of the Abu Dhabi Global Market (ADGM) has published a consultation paper proposing a legal framework for Distributed Ledger Technology (DLT). The framework would focus on the structure of DLT foundations, governance and control, tokens, token-holder voting, reporting and disclosures, beneficiaries, profit distribution, supervision, liquidation or voluntary strike-off, and insolvency. The ADGM is seeking public feedback on the proposal until May 12, 2023.
🇦🇪 UAE proposes bill to create a decentralized economy for its free zone with 100% tax exemptions.
— Watcher.Guru (@WatcherGuru) April 22, 2023
New Framework for DLT Foundations
The consultation paper suggests the creation of a standalone DLT foundations framework, rather than amending ADGM’s existing foundations regime. The proposal advocates for a minimum initial asset value of $25,000 for DLT Foundations and recognizes token holders’ legal status. Decentralized governance is also provided for, with token-holders having the right to vote on certain matters unless expressly stated otherwise in the Charter. The proposal emphasizes transparency, fairness, and audited annual account submissions, with the Registrar having the power to impose temporary prohibition orders on marketing on public policy grounds.
The proposal provides an opportunity for the ADGM to design a new framework for DLT foundations that “cherry-picks” the features of foundations that might be attractive to developers of DLT projects. The ADGM RA’s recognition of the overall suitability of foundation structures for DLT projects underscores its alignment with ADGM’s plan to support and foster crypto and DeFi-related developments.
Regulatory Uncertainty in Crypto
The proposal comes at a time when the lack of regulatory clarity around cryptocurrencies and stablecoins has become a major concern for market participants. The proposed legal framework for DLT would provide clarity and regulatory certainty, which would benefit the broader crypto ecosystem. However, it remains to be seen how the ADGM will address the concerns raised by industry participants and other stakeholders during the public consultation period.
The ADGM’s proposed legal framework for DLT foundations is a positive development for the crypto ecosystem. It provides regulatory clarity and certainty, which is critical for the growth of the industry. The ADGM’s emphasis on transparency, fairness, and accountability also bodes well for the long-term sustainability of DLT projects. As the crypto ecosystem continues to evolve, it will be interesting to see how regulators around the world respond to the challenges posed by this rapidly growing industry.
