A regulator in Abu Dhabi has released a consultation paper, proposing to create a stablecoin framework related to fiat-referenced tokens.
A regulator in Abu Dhabi, the Financial Services Regulatory Authority (FSRA), plans to regulate stablecoins. In this regard, it has proposed a stablecoin framework and released a consultation paper. The stablecoin regulation is mainly for a specific type of stablecoin known as fiat-referenced tokens (FRTs).
The consultation paper has invited proposals from stakeholders for the framework. The latter mentions that stablecoin issuers would be subject to new rules. The main requirement for the issuers would be to value reserve assets of FRTs equal to that of the outstanding FRTs in circulation. Meanwhile, the framework also mentions that the FRTs should see new valuations on a daily basis.
Further, the paper also defined FRTs, stating, “While all “stablecoins” establish their value in reference to a fiat currency, asset-referenced tokens and commodity-backed tokens are not considered “stable” due to the fluctuation of the value of their underlying asset, as expressed in fiat currency ..”
Moreover, the regulator also directed the paper at those wishing to issue FRTs from the Abu Dhabi global market. Besides, it also invited others to respond who were active in the stablecoin industry. The FSRA set October 3, 2024 as the deadline for the responses.
Stablecoin regulation has been a major subject of reflection in the global crypto space. Early this year, a Hong Kong regulator also released a consultation paper on plans to regulate FRTs. Stablecoin regulation has also been an important subject in government circles in the UK and the US.
Stablecoins act as a bridge between traditional finance and the crypto world, providing a more stable store of value. It is also useful in transactions, especially those like cross-border transfers. On the other hand, stablecoins are also important for traders.
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