UAE ADGM First MENA regulator to issue DeFi discussion paper

UAE ADGM regulatory arm, the Financial Services Regulatory Authority (FSRA) is the first MENA regulator to issue a DeFi ( Decentralized Finance) discussion paper to engage with industry practitioners and other stakeholders to explore the potential opportunities arising from DeFi, associated risks and what a future regulatory framework may resemble.

DeFi is a new way to deliver financial services through automated software protocols. These protocols currently offer several financial services that are analogous to traditional financial services (TradFi). DeFi is predominantly un regulated.

UAE ADGM, FSRA has issued this discussion paper to foster dialogue amongst the DeFi community, including financial institutions, digital asset businesses and policy makers on how DeFi may be regulated. It sets out the FSRA’s views on the likely medium-term direction of DeFi, high level policy positions that the FSRA is considering adopting, and an exploration of what a DeFi regulatory framework might look like.

The DeFi discussion paper will also be mapped as a knowledge graph within the FSRA’s digital regulations beta pilot. This will allow market participants to visualize and better grasp the concepts that link DeFi to TradFi and their implications for regulatory guidance.

Mr Emmanuel Givanakis, CEO of the ADGM FSRA said: “DeFi is an emerging part of the global financial ecosystem that holds the promise of delivering more efficient and tailored financial services. In order to achieve this potential, the risks arising from DeFi must be identified and appropriately addressed. We are pleased to contribute our views on DeFi and its potential future direction to the ongoing discussion in the community, in association with industry practitioners. We also look forward to collaborating and starting a dialogue with the industry that will help us make informed policy choices to address these risks and thereby realise the potential benefits of DeFi and on any future regulatory developments.”

The discussion paper can be found here: Discussion Paper No. 1 of 2022 - Policy Considerations for Decentralised Finance.

ADGM FSRA was the first regulatory body to issue virtual asset regulations. It has also recently incorporated NFTs into the regulation as well.