The Abu Dhabi Global Market (ADGM), a financial hub and free zone in the emirate, has issued recommendations on non-fungible tokens (NFT) in a consultation document as part of its efforts to integrate digital assets into its regulatory ecosystem.
- According to the paper released Monday, the ADGM’s Financial Services Regulatory Authority (FSRA) “is not proposing to develop a formal regulatory framework for NFTs” at this time.
- Firms that are licensed and regulated by ADGM in services such as trading and custody would be permitted to offer them for NFTs, according to the draft proposals, according to Simon O’Brien, executive director for markets at the FSRA.
- “Right now, the way we’re attempting to accomplish that is to gradually integrate people into our ecosystem,” the free zone’s CEO, Emmanuel Givanakis, told CoinDesk. According to Givanakis, the regulator began investigating NFTs at least six months ago.
- Little will change for regulated businesses that follow the regulations, according to O’Brien. According to him, they may create a new non-regulated organization within ADGM to engage with NFTs and outsource regulated services like custody and client onboarding back to the licensed firm.
- The document is open for discussion until May 20, and “quite a few firms” have already expressed an interest in responding, according to O’Brien.
- “NFTs themselves are not financial tools,” Givanakis added, comparing them to works of art. “If a derivative is formed around them, yeah, they become a financial instrument,” he explained.
- New standards for public key management and risk disclosures for virtual asset service providers were also proposed in the study.
- In 2018, ADGM was one of the first jurisdictions to release a comprehensive virtual asset regulatory framework.