Abu Dhabi Global Market (ADGM), the emirate’s free zone, published a consultation paper on March 21 titled “Proposals for enhancements to capital markets and virtual assets in ADGM.” The document contains draft guidelines that, among other asset classes, cover nonfungible token (NFT) trading. The paper proposes that companies with a license from the free zone’s financial regulator be allowed to facilitate NFT trading.
Along with sections dedicated to traditional financial instruments, the document contains a little more than a page on virtual assets and NFTs. In this section, the free zone’s chief regulator, the Financial Services Regulatory Authority (FSRA), describes NFTs as intellectual property rather than “specified investments or financial instruments.” It also proposes to allow multilateral trading facilities (MTFs) and Virtual Asset Custodians (VAC) to operate NFT marketplaces.
The document also mentions that transactions in NFTs may trigger the requirement to comply with ADGM’s Anti-Money Laundering (AML) and Sanctions Rules.
At this point, as the document specifies, FSRA is not proposing a formal regulatory framework for NFTs. The consultation paper is open for comment until May 20, and encourages stakeholders to share their thoughts on several major questions, for example, “What types of NFTs should be permitted to trade upon MTFs?” and “How would it be best to integrate third-party NFT registries?”
ADGM is one of the United Arab Emirates’ three major free economic zones that host virtual asset service providers (VASPs), and the first one to get its regulatory framework back in 2018. Last week, though, it was the UAE’s another free zone — Dubai Multi Commodities Centre (DMCC) — that made the headlines by granting its freshly legislated crypto license to FTX and Binance exchanges.