The Abu Dhabi Global Market (ADGM) has been making a valiant effort to position the UAE as the crypto capital of the world. The region’s regulatory clarity, streamlined process, and strategic position as a global financial hub have contributed to its success.
BeInCrypto spoke with Dmitry Fedotov, the Head of DLT Foundations at ADGM, to understand how its blockchain-friendly regulations have driven crypto giants to open offices in Abu Dhabi.
ADGM Poised to Accelerate Blockchain Adoption
Over the past few years, the UAE has emerged as a global leader in blockchain and Web3 adoption, creating a favorable environment for innovation and growth. The ADGM, a financial-free zone on Al Maryah Island in Abu Dhabi, has gained particular recognition for its blockchain-friendly regulatory framework.
The ADGM was established in 2013 by a Federal Decree. It functions as the city’s financial center and responds to an independent legal and regulatory framework. Its approach to Web3 innovation has attracted major players in the industry.
“ADGM positions itself as a global leader by taking such innovative steps, inspiring other jurisdictions to adopt forward-thinking solutions that redefine governance and engagement in emerging technologies,” Fedotov told BeInCrypto.
The UAE at large is experiencing a surge in crypto adoption as more businesses and users have adopted digital assets for transactions and investments.
According to Statista, the number of users participating in the country’s crypto market will reach 3.78m users by 2025. Consequently, revenue rates are expected to remain high this year.
Meanwhile, the Aptos Foundation, a leading global blockchain entity, announced last month the opening of its new office in the ADGM.
The strategic move aims to drive regional partnerships, accelerate blockchain adoption, and expand the Aptos ecosystem. It also reinforces the UAE’s status as a hub for blockchain and Web3 innovation.
“Partnerships with industry leaders enhance our ecosystem’s credibility, while streamlined licensing processes make ADGM stand out compared to other financial hubs. These measures create a unique balance of growth opportunities and regulatory clarity,” Fedotov said.
Beyond Aptos, Chainlink Labs, TON, and Polygon Labs established their presence in ADGM to accelerate adoption in the Middle East.
However, for any crypto entity to pursue business endeavors in ADGM, it must first undergo a series of evaluations to determine whether it is eligible for operation.
Regulation of Virtual Asset Activities in ADGM
Over the years, the UAE has established notable regulatory clarity for the crypto industry. Before offering virtual asset services in the region, an entity must first gain an operating license from ADGM’s Financial Services Regulatory Authority (FSRA).
The FSRA defines a virtual asset as “a digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status in any jurisdiction.”
Virtual assets do not require a third party to create or interact with them. Because of this, they present a series of unique challenges for regulators worldwide.
In response, the FSRA considers seven key factors in determining whether a virtual asset meets these requirements. The factors include asset maturity, security, traceability and monitoring, exchange connectivity, type of distributed ledger, innovation and efficiency, and practical application.
More specifically, the FSRA evaluates whether there is sufficient client demand for the virtual asset. It also monitors whether controls are in place to manage its volatility and if the asset can withstand or respond to its specific risks and vulnerabilities.
Applicants also need to demonstrate whether the virtual assets help to solve a fundamental problem. Examples include meeting an unmet market need and determining whether they possess real-world, quantifiable functionality.
“This pioneering spirit ensures ADGM remains at the forefront of shaping the future of how regulators approach ever-evolving regulatory needs,” Fedotov said.
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2025-01-23 04:22