While Bitcoin and Initial Coin Offering are facing heat in several economies of the world, Abu Dhabi government has gone ahead and released a set of guidelines for people looking to participate or initiate token sales through initial coin offerings.
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The Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA) has said that anti-money laundering and know-your-customer (KYC) rules will be applied to token sales. The token sales will be either classified as a commodity or security on a case per case basis.
The document regarding virtual currencies says,
“Virtual currencies, unlike fiat currencies, are not legal tender. However, virtual currencies have “value” in that they can be exchanged for other things of value, with that value being dependent on considerations of supply and demand. In this respect, virtual currencies have much in common with physical commodities such as precious metals, fuels and agricultural produce. Therefore from a regulatory perspective, virtual currencies are treated as commodities, which are not Specified Investments as defined under the FSMR. This means that a “mining” or spot transaction in virtual currencies will not constitute a Regulated Activity in itself.”
The guiding document also maintains that a token sale might fall under or outside the definition of a security under the law of the state. This will vary case to case. The tokens that are not treated as securities will be treated as commodities.
Initial Coin Offering, in the past few months, has emerged as one of the most sought-after methods for startups to raise funds. Startups have raised more funds through initial coin offerings than traditional venture capital or crowdfunding campaigns in the past few months. ICOs are at the moment unregulated and there has been a debate on how to regulate the process.
