The United Arab Emirates (UAE) is going ahead with its plans to use initial coin offerings (ICOs) for fundraising local startups in the new year to help boost financing in capital markets.
If successful, the UAE could become one of just a few countries in the world to implement a regulatory framework around ICOs and cryptocurrencies. To create this environment, the UAE has stated that domestic companies will be legally able to fundraise using ICOs next year, alongside traditional IPOs. To facilitate this, legislation will deem ICOs as securities in a draft to be enacted early in 2019.
Last year Abu Dhabi issued guidelines on cryptocurrencies and ICOs, regulating the latter as “securities”. Cryptocurrencies are considered commodities by the government of Abu Dhabi but are not legal tender. The move to introduce ICOs was confirmed by UAE securities market watchdog chief Omar Saif al-Zaabi who commented:
“The board of the Emirates Securities & Commodities Authority [ESCA] has approved considering ICOs as securities. As per our plan, we should have regulations on the ground in the first half of 2019.”
IPO performance has been significantly weakened over the past two years by a number of economic factors, including low oil prices and a weak equity market in the Gulf as a whole. In order to stem the tide, a new law is being brought into legislation which now will permit family-owned businesses to sell a majority of even 100% stakes in their companies with IPOs. Also, in a radical move for the region, it is suggested that there should be a mandated 20% of women on company boards, in the hope to attract more female investors.
The ESCA has sought help from overseas to implement their new plans and draft the new ICO regulations; its next task will be to develop crypto platforms to support the launches with support from both the Abu Dhabi and Dubai stock markets.
In other news from the Gulf, it was announced yesterday that Dubai residents will soon be able to pay for school fees, bills and some retail purchases using emCash, a state-developed blockchain crypto, which the government hopes will have wider applications in the future. A spokesperson for the state-backed subsidiary, emCredit, stated:
“To be the world’s first city to offer blockchain-based payment solutions to our residents is an exciting moment for Dubai… Deploying cutting-edge technology such as blockchain is a key priority and is delivering benefits to our citizens in the form of convenience and securities to customers and merchants across Dubai.”
The project was initiated by Dubai Department of Economic Development.
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