Abu Dhabi seeks public opinion on new legal framework for decentralized economy

Getting your Trinity Audio player ready...

The Abu Dhabi Global Market (ADGM), a free-trade zone in the United Arab Emirates, has kickstarted a public consultation on its proposed Web3 regulations.

According to ADGM’s Registration Authority, the proposed rule book seeks to create uniform operations standards for regional distributed ledger technology (DLT) firms. Gleaning from the provisions, the Authority appears keen on streamlining the disclosures, governance structures, and liquidation for local blockchain-based firms.

The objective of the proposed DLT Foundations Regulations 2023 is to create a foundation “that might be attractive to developers of DLT projects while eliminating features that impede innovation in the sector,” said the ADGM. The consultation notes that the regulatory Authority is not a financial regulator, making it unable to determine the legality of token issuance or issue financial services permits.

“This Consultation Paper is of interest to any persons operating or planning DLT projects, persons engaging in digital asset-related activities and their legal advisors, as well as DLT industry participants, associations, and stakeholders,” read the paper.

Under the suggested rules, the ADGM hopes to preserve the “optionality” of decentralized autonomous organizations (DAOs) within the zone, pledging to confer legal personality on the entities. DAOs will be allowed to carry out any activity provided they are not unlawful or repugnant to public opinion.

Other provisions include a clause requiring entities to have licensed company service providers, but this mandate can be dispensed upon showing proof that the entity meets the guidelines of being exempt. Furthermore, the nominal initial asset value for DLT Foundations is pegged at $25,000 and is expected to be paid within 6 months of registration.

“The RA does not envisage the need for a bespoke data protection/cyber security regime to be built into the New Regime,” read the paper. “Rather, the RA proposes addressing such risk by including a general compliance provision in the New Regime.”

UAE aims to become a Web3 paradise

The UAE is steadily marching toward becoming a leading digital asset hub, with Dubai leading. Dubai pulled ahead from the rest of the pack after unveiling a new regulatory framework and a new authority to govern the industry in 2022.

Since then, the country has unveiled several incentives, including a $2 billion fund for firms building in blockchain while openly supporting metaverse developments. Given the positive stance, several firms have set up operations in the UAE to serve as a base for their operations in the Middle East and North Africa.

Watch: Middle East governments trying to find good use cases for blockchain: Ahmed Yousif