ICO Regulations in the UAE in 2019 Focus on Security and InnovationBusiness Registration Dubai
The Securities and Commodities Authority (SCA), the United Arab Emirates (UAE) financial regulator, is set to introduce regulations for initial coin offering (ICO) in the country by the end of the first half of 2019; a move intended to provide companies another way to raise capital through crowd funding.
What are ICOs?
ICOs are the cryptocurrency version of an initial public offering, where companies go public and sell shares to individual investors. With ICOs, investors buy units of a cryptocurrency and receive tokens instead of shares.
ICOs can be a source of capital for new business setup in Dubai or small- to medium-sized enterprises in UAE. Companies can issue crypto-tokens to investors in the same manner the shares are given out in an IPO of equity.
Until now, the majority of ICOs globally have been availed to fund the development of new cryptocurrencies.
Developments for ICO trading
The SCA has permitted ICOs as securities and will act with the Abu Dhabi Securities Exchange and Dubai Financial Market to develop trading platforms for ICOs in 2019 and onwards.
Obaid Al Zaabi, the SCA chief executive says that SCA has signed agreements with law firms to devise regulatory sandbox (framework that helps the development of financial technology industry) and rule books for issuance of ICOs. Legal requirements are expected to be completed by mid-2019 after that technology will be adopted and infrastructure will be developed on the side of exchanges.
ICOs when issued on a trustworthy platform will be a new tool to finance the SMEs in UAE and will serve as novel way of crowdfunding that is quite different from traditional methods, according to the SCA chief.
Crowdfunding is offered by means of internet. ICOs offer another way of crowdfunding to smaller enterprises. According to ICO Rating, a global ratings agency for the cryptocurrency market, they raised $3.3 billion (Dh12bn) through 412 projects in the first quarter of 2018. With the introduction of blockchain technology, the fundraising is expected to be more secure, efficient and accurate.
Focus on Security
Security of cryptocurrencies is a major concern for investors as more than $1.1 billion was lost to crypto-thefts in the first half of 2018, according to cyber-security company Carbon Black in Massachusetts.
SCA chief mentions that security is right now chief concern of SCA. They will authorize a much selected secured asset class for the issuance of ICOs.
Blockchain technology adds level of security, increases transaction speeds, reduces overall costs and enhances efficiency. Therefore it is expected to add value to the UAE’s current systems and markets infrastructure.
Experts are of the view that once ICO regulations in UAE are introduced, UAE will be amongst top destinations for blockchain related businesses and join ranks of top global financial markets regulating crypto-assets.
Keen to modernize its financial infrastructure, UAE is one of the first jurisdictions to regulate ICOs which brings UAE at the forefront of the industry. We can expect UAE in the coming years become a competitive location to attract ICOs and blockchain related investments that bring ideal opportunity to finance the small- and medium-sized enterprises in the UAE.
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