A comparative guide to crypto-asset regulations
Published: 03:08 PM,Aug 03,2024 | EDITED : 07:08 PM,Aug 03,2024
The rapid growth and transformative potential of the crypto-asset industry have spurred global regulatory efforts. This guide provides a detailed comparison of three prominent regulatory regimes: the European Union's Markets in Crypto-Assets (MiCA), Dubai's Virtual Assets Regulatory Authority (VARA), and Abu Dhabi Global Market's (ADGM) Financial Services Regulatory Authority (FSRA) framework. The goal is to make clear what are the intentions, approaches, and specific provisions of each of them, highlighting their similarities and differences.
European Union's Markets in Crypto-Assets (MiCA)
MiCA represents the European Union's first comprehensive regulatory framework for crypto-assets. Proposed in September 2020 and agreed upon in June 2022, MiCA began partial implementation for asset-referenced and e-money tokens in June 2024, with full implementation expected in December 2024. MiCA aims to harmonize crypto regulations across all 27 EU member states, replacing fragmented national regulations.
It prioritizes investor protection through robust requirements for crypto-asset service providers (CASPs), including authorization, capital requirements, and adherence to conduct of business rules. Furthermore, it seeks to ensure market integrity by preventing market abuse and promoting transparency. MiCA also fosters responsible innovation within a clear regulatory framework.
Key provisions of MiCA cover a wide range of crypto-assets, including utility tokens, asset-referenced tokens, and e-money tokens. It mandates whitepapers for new crypto-asset offerings, outlining project details, risks, and investor rights. CASPs are required to be authorized and supervised by national competent authorities, adhere to prudential requirements, and implement robust risk management systems. Specific requirements are imposed on stablecoin issuers, including capital requirements, redemption rights, and governance arrangements. MiCA also includes provisions for sustainability and disclosure of the environmental impact of crypto-asset activities.
MiCA has already garnered massive attention from global players in the crypto industry, with many adapting their operations to comply with the upcoming regulations. It has set a precedent for comprehensive crypto regulation, influencing discussions and approaches in other jurisdictions.
Dubai's Virtual Assets Regulatory Authority (VARA)
Established in March 2022, VARA is the world's first independent regulator solely focused on virtual assets. Its licensing framework, launched in February 2023, aims to position Dubai as a global hub for the virtual asset (VA) industry by providing a clear and comprehensive licensing regime for Virtual Asset Service Providers (VASPs). VARA is committed to investor protection through robust requirements for VASPs, including capital adequacy and AML/CFT compliance, while fostering innovation and attracting VA businesses to Dubai.
VARA's key provisions offer a comprehensive licensing framework covering various VA activities, such as exchange services, custodial services, and advisory services. It adopts a risk-based approach to regulation, tailoring requirements to the specific risks of each VA activity. Consumer protection is prioritized through clear disclosures, fair treatment of customers, and complaint handling procedures. Additionally, VARA sets rules for market conduct, including preventing market manipulation, insider trading, and conflicts of interest.
VARA has successfully attracted major crypto companies like Binance, Crypto.com, and Bybit to set up operations in Dubai. It has contributed to the growth of Dubai's VA ecosystem, with an increasing number of licensed VASPs operating in the region.
Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA)
ADGM, a financial free zone in Abu Dhabi, has developed a comprehensive regulatory framework for virtual assets under its Financial Services Regulatory Authority (FSRA). The FSRA's approach, with the first Crypto Asset Regulations introduced in 2018 and Crypto Market Abuse Regulations added in 2023, integrates crypto-asset regulation into its broader financial services framework, ensuring consistency and alignment with existing regulations. It adopts a risk-based approach, focusing on mitigating specific risks associated with different VA activities. ADGM prioritizes investor protection by setting high standards for licensing, operational conduct, and disclosure, while promoting fair and transparent markets by preventing market abuse and ensuring compliance with international standards.
Key provisions of ADGM FSRA require licensing for various VA activities, including operating exchanges, providing custodial services, and offering investment advice. It imposes strict operational requirements on licensed entities, including capital adequacy, risk management, and AML/CFT compliance. The Crypto Market Abuse Regulations introduce specific measures to prevent market manipulation and insider trading. Additionally, the FSRA sets standards for the safekeeping of client assets, ensuring segregation and protection from unauthorized access.
ADGM has attracted a growing number of crypto-asset businesses due to its robust regulatory framework. It has established itself as a leading jurisdiction for crypto-asset innovation and investment in the Middle East.
Stefano Virgilli
The author is a member of the International Press Association
European Union's Markets in Crypto-Assets (MiCA)
MiCA represents the European Union's first comprehensive regulatory framework for crypto-assets. Proposed in September 2020 and agreed upon in June 2022, MiCA began partial implementation for asset-referenced and e-money tokens in June 2024, with full implementation expected in December 2024. MiCA aims to harmonize crypto regulations across all 27 EU member states, replacing fragmented national regulations.
It prioritizes investor protection through robust requirements for crypto-asset service providers (CASPs), including authorization, capital requirements, and adherence to conduct of business rules. Furthermore, it seeks to ensure market integrity by preventing market abuse and promoting transparency. MiCA also fosters responsible innovation within a clear regulatory framework.
Key provisions of MiCA cover a wide range of crypto-assets, including utility tokens, asset-referenced tokens, and e-money tokens. It mandates whitepapers for new crypto-asset offerings, outlining project details, risks, and investor rights. CASPs are required to be authorized and supervised by national competent authorities, adhere to prudential requirements, and implement robust risk management systems. Specific requirements are imposed on stablecoin issuers, including capital requirements, redemption rights, and governance arrangements. MiCA also includes provisions for sustainability and disclosure of the environmental impact of crypto-asset activities.
MiCA has already garnered massive attention from global players in the crypto industry, with many adapting their operations to comply with the upcoming regulations. It has set a precedent for comprehensive crypto regulation, influencing discussions and approaches in other jurisdictions.
Dubai's Virtual Assets Regulatory Authority (VARA)
Established in March 2022, VARA is the world's first independent regulator solely focused on virtual assets. Its licensing framework, launched in February 2023, aims to position Dubai as a global hub for the virtual asset (VA) industry by providing a clear and comprehensive licensing regime for Virtual Asset Service Providers (VASPs). VARA is committed to investor protection through robust requirements for VASPs, including capital adequacy and AML/CFT compliance, while fostering innovation and attracting VA businesses to Dubai.
VARA's key provisions offer a comprehensive licensing framework covering various VA activities, such as exchange services, custodial services, and advisory services. It adopts a risk-based approach to regulation, tailoring requirements to the specific risks of each VA activity. Consumer protection is prioritized through clear disclosures, fair treatment of customers, and complaint handling procedures. Additionally, VARA sets rules for market conduct, including preventing market manipulation, insider trading, and conflicts of interest.
VARA has successfully attracted major crypto companies like Binance, Crypto.com, and Bybit to set up operations in Dubai. It has contributed to the growth of Dubai's VA ecosystem, with an increasing number of licensed VASPs operating in the region.
Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA)
ADGM, a financial free zone in Abu Dhabi, has developed a comprehensive regulatory framework for virtual assets under its Financial Services Regulatory Authority (FSRA). The FSRA's approach, with the first Crypto Asset Regulations introduced in 2018 and Crypto Market Abuse Regulations added in 2023, integrates crypto-asset regulation into its broader financial services framework, ensuring consistency and alignment with existing regulations. It adopts a risk-based approach, focusing on mitigating specific risks associated with different VA activities. ADGM prioritizes investor protection by setting high standards for licensing, operational conduct, and disclosure, while promoting fair and transparent markets by preventing market abuse and ensuring compliance with international standards.
Key provisions of ADGM FSRA require licensing for various VA activities, including operating exchanges, providing custodial services, and offering investment advice. It imposes strict operational requirements on licensed entities, including capital adequacy, risk management, and AML/CFT compliance. The Crypto Market Abuse Regulations introduce specific measures to prevent market manipulation and insider trading. Additionally, the FSRA sets standards for the safekeeping of client assets, ensuring segregation and protection from unauthorized access.
ADGM has attracted a growing number of crypto-asset businesses due to its robust regulatory framework. It has established itself as a leading jurisdiction for crypto-asset innovation and investment in the Middle East.
Stefano Virgilli
The author is a member of the International Press Association