ADGM’s Framework for Fiat-Referenced Tokens: Key Highlights
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) introduced a regulatory framework for fiat-referenced tokens (FRTs), commonly referred to as stablecoins. This framework provides a robust structure for their issuance and management, focusing on stability, transparency, and investor protection while fostering innovation in digital finance.
A Framework for Stability and Trust
Fiat-referenced tokens (FRTs) are digital assets pegged to fiat currencies, such as the U.S. dollar, designed to maintain price stability. Recognizing their importance in bridging traditional finance and blockchain ecosystems, ADGM’s regulatory framework ensures a secure environment for these instruments.
The FSRA now classifies FRT issuance as a distinct regulated activity, with strict compliance requirements. Issuers must maintain full reserve backing, implement robust governance protocols, and ensure transparency in operations to protect users and uphold market integrity.
Emmanuel Givanakis, CEO of the ADGM FSRA, stated: “Our FRT framework is a significant milestone in ADGM’s evolution as a progressive international financial centre. Through extensive consultation with industry stakeholders, we have created a regime that balances innovation with strong regulatory oversight. This framework provides the regulatory certainty that industry participants need while maintaining high standards of financial stability and investor protection. We believe this positions ADGM as a premier jurisdiction for responsible FRT issuance and shows our commitment to fostering responsible innovation in financial services.“
USD-Backed FRTs and Retail Payment Requirements
The FSRA’s framework explicitly permits the issuance of USD-backed fiat-referenced tokens, provided they meet strict reserve and compliance standards. However, for FRTs to be used in retail payments within the UAE, entities must secure a No Objection Certificate (NOC) from the Central Bank of the UAE (CBUAE).
The Central Bank of the UAE announced its Payment Token Regulations on June 25, 2024, providing further clarity on stablecoin usage in the country.
This dual-layer approach ensures that while ADGM entities can innovate and issue tokens, retail adoption within the UAE aligns with national monetary policies and safeguards financial stability.
Akshata Namjoshi, Associate Partner at Karm Legal Consultants, commented: “The FSRA’s comprehensive framework for fiat-referenced tokens sets a robust foundation for the adoption and regulation of stablecoins in the UAE. Coupled with the CBUAE’s initiatives on AED stablecoins and the recognition of foreign stablecoins, this detailed approach will attract global players, enhance cross-border payment efficiencies, and establish the region as a leader in digital asset innovation.“
Strengthening the Digital Asset Ecosystem
ADGM’s regulatory framework sets a high standard for digital asset governance. By emphasizing full reserve backing, transparency, and compliance, the FSRA creates a secure environment that fosters user trust and market stability. Its alignment with global standards further positions ADGM as a leading jurisdiction for digital asset innovation.
Through this framework, ADGM demonstrates its ability to balance innovation with strong regulatory oversight, reinforcing its role as a hub for compliant and forward-thinking digital asset activities. This approach paves the way for a future where blockchain-enabled financial services are seamlessly integrated within a secure and regulated environment.
