UAE’s Abu Dhabi Global Market after announcing its DLT token issuance consultation paper in April 2023 has now officially launched its new regulation that will allow DLT (Distributed Ledger Technology) Foundations, DAO (Decentralized Autonomous Organizations) to issue tokens.
This means that DLT Foundations of Layer 1 or Layer 2 protocol Foundations can receive licenses from ADGM and offer tokenized assets, or digital assets, or possibly established organizations wishing to use DLT and issue tokens.
This new regulation could encourage global blockchain DLT protocol Foundations such as Ethereum, Cardano, Hedera, and others to enter the UAE. Morever, home grown protocols such as UAE based Venom Foundation which recently announced a partnership with the UAE Government to establish the National Carbon Credit System can also utilize the new regulation.
The ADGM Distributed Ledger Technology Foundations Regulations cover the structure of the DLT Foundations; governance and control; tokens; reporting, disclosures and publication; beneficial ownership; supervision; insolvency and liquidation or voluntary strike off.
This came as a response to interest from foundations being used for DLT purposes that require issuance of governance tokens.
As per the press release, “The new regime is set to enable positive transformation across the blockchain and Web3 landscape, fostering a more transparent and efficient future. Issued by the Registration Authority (RA) of Abu Dhabi Global Market (ADGM), the Distributed Ledger Technology (DLT) Foundations Regulations 2023 marks a significant milestone in the evolution of digital assets regulatory frameworks across the region and at an international level. It aims to provide a comprehensive framework for DLT Foundations and Decentralized Autonomous Organizations (DAOs), enabling them to operate and issue tokens recognizing the unique needs of the Blockchain industry.”
The regulatory framework is designed to be suitable for Blockchain Foundations, Web3 entities, DAOs, and traditional Foundations seeking to enhance their operations through DLT.
According to the regulation document, a DLT Foundation is a legal entity established to use, deploy, develop, facilitate or support DLT or to issue tokens.
The DLT Foundation must have initial assets with a requirement for a minimum initial asset value in order to be registered. The Minimum Initial Asset Value of a DLT Foundation must be paid within six months following the receipt by the DLT Foundation of the registration certificate under section 9 or when the DLT Foundation becomes active as prescribed by the Registrar.
In addition the Minimum Initial Asset Value must be paid in fiat currency and cannot be contributed in any other form, including Tokens.
As such, only companies that are well financed well established can be part of the regime, and not startups which have little to no capital who are seeking to raise funds just from token sales.
In terms of fees, between business license and ADGM continuation, the cost reaches almost $20,000. In addition if the DLT Foundation intends to issue tokens, token holders will have voting rights, depending on the category of token holders.
In terms of token issuance, DLT Foundations will have to provide information about the operation of the relevant smart contracts, vesting schedules and overall token supply over time; and provisions, if applicable, on pre-emption and buy-back rights (and circumstances in which those will apply), as well as provisions regarding token economics; any restrictions on transferability or technological lock-ups; types of Tokens that the DLT Foundation can issue or limitations on types of Tokens that the DLT Foundation can issue and blockchain protocols used for issuance; as well as the purposes and intended use of Tokens.
His Excellency Ahmed Jasim Al Zaabi, Chairman of ADGM, stated, “Abu Dhabi is rapidly emerging as the destination of choice for global players at the forefront of digital asset development. The introduction of the DLT Foundations Regime marks a revolutionary step forward, reinforcing ADGM’s commitment to a proactive approach rooted in extensive cross-industry dialogue and collaboration with various stakeholders. The new regime serves as a driving force for positive change in the digital assets sector. By transforming the blockchain and Web3 landscape, we are moving towards a future characterized by setting global benchmarks with enhanced transparency and efficiency.”
The new regulation is part and parcel of UAE’s strategy towards adopting new technologies icluding digital assets, crypto, DLT, Blockchain, AI and more.
