Regulations for initial coin offering (ICO) will be introduced in the UAE by the end of the first half of 2019, according to the country’s Securities and Commodities Authority (SCA), which has approved the offerings as securities.
The move is aimed at providing businesses with a new, more secured option to raise capital through crowdfunding with the help of blockchain technology. ICOs are used as a source of capital for small and medium businesses as they allow them to issue cryptocurrency tokens to investors in the same way that shares are issued in initial public offerings of companies’ equities.
SCA is set to partner with the Abu Dhabi Securities Exchange and Dubai Financial Market to develop trading platforms for ICOs next year.
“We have signed agreements with law firms to come up with the sandbox and rule books for the issuance of ICOs. Legal requirements will be finished by the end of the first half of 2019… then there will be adoption of technology and development of infrastructure on the side of the exchanges,” said SCA chief executive Obaid Al Zaabi.
The Abu Dhabi and Dubai stock markets will adopt the latest blockchain technology using cryptography in order to issue ICOs, though the implementation plan will be introduced following the finalised agreements with ADX and DFM, Al Zaabi said.
“Our market is open. [ICO] registration and licensing is available for all kinds of companies, from across the world,” he added.
The CEO is not worried about cryptocurrency volatility despite the value of one Bitcoin rising to almost $20,000 last year only to drop to about $4,000 this year. He said the authority will focus on crypto issuance as the service sees clear demand.
“Bitcoin, Ethereum and others are not our business. We are more concerned about crypto issuance and how to bring them for trade [securities] on our exchanges. There is a demand… we have already received couple of requests for the issuance of the crypto assets and tokens,” he said.
However, Al Zaabi said cryptocurrencies security is a main concern for the authority.
Crypto-thefts saw investors lose over $1.1 billion in the first six months of 2018, according to US-based cyber-security firm Carbon Black.
“SCA considers security as main priority… we are going to authorise a very selected secured asset class in a way of issuing the ICOs. We are a regulator, we put money in regulations and we have sufficient budget in a way of delivering our responsibility,” he said.
The chief executive said blockchain is likely to increase transaction speeds and reduce overall financial costs while adding security and efficiency.