Abu Dhabi's Regulatory Blueprint: Steering the Future of Blockchain and Web3

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Abu Dhabi's Groundbreaking Initiative towards Decentralized Technologies

In a significant stride for the blockchain and decentralized technology sector, the Abu Dhabi Global Market (ADGM) recently unveiled the Distributed Ledger Technology Foundations Regulations 2023 (DLT Regulations). This pioneering set of regulations, introduced within the international financial free zone, is the first of its kind and offers a comprehensive framework for entities operating within the Web3 domain.

Understanding the DLT Foundations Regulations

A DLT foundation, under the new regulations, is defined as a legal entity equipped to hold and manage digital assets for specific purposes, such as supporting a DLT network or protocol. These foundations can provide financial backing to blockchain networks without being directly involved in their operations.

To be recognized as a DLT Foundation, organizations must submit a signed charter detailing their initial assets, governance structure, and potential token issuance. This charter, accompanied by a white paper, tokenomics paper, and a reference to a DLT Framework, offers a transparent view of the foundation's objectives and operations.

Registering a DLT Foundation: A Step by Step Process

  1. Submission: Founders must submit their foundation's charter, accompanied by other essential documents, to the Registrar of DLT Foundations.
  2. Fees: An initial application fee of $50,000 USD is mandatory.
  3. Charter Specifications: The charter should outline the foundation's objectives, activities, governance structure, beneficiaries, and the rights and obligations of the tokenholders.
  4. Asset Value: Foundations should have a minimum initial asset value of $50,000 USD. They can receive additional financial support from founders or other sources.

It's crucial to note that the assets of the DLT foundation are distinct from those of its founder, councillors, guardian, and beneficiaries. Furthermore, these assets remain unaffected by foreign laws that might influence their ownership or transfer.

Intricate Governance Structure

A DLT Foundation's governance operates through three main pillars.

  1. Council: Responsible for managing the foundation's assets and affairs, ensuring they align with the charter and DLT Regulations. This council should comprise at least two councillors who adhere to specific qualifications and duties.
  2. Guardian: Appointed by either the founder or the council, the guardian ensures the council acts in harmony with the foundation's objectives. They hold specific powers and duties and can be replaced or removed by either the council or the tokenholders.
  3. Tokenholders: These are individuals who control or hold tokens issued by the foundation. They play a pivotal role in decisionmaking, with the authority to approve or reject matters like amendments to the charter or the foundation's migration or dissolution.

Mandatory Reporting Obligations

DLT foundations are bound to maintain accounting records and prepare annual accounts, audited by an independent entity. These accounts must be made available on the foundation's website and submitted to the Registrar within six months post the financial yearend. The Registrar holds the authority to review, revise, or mandate the correction of these accounts, ensuring transparency and compliance.

ADGM's Vision for the Future

Established in 2015, ADGM has been at the forefront of advancing its regulatory framework for digital assets and blockchain technologies. By introducing the DLT Regulations, ADGM emphasizes its strategy to enhance its position in the blockchain and digital asset sector globally.

With the Hub71+ Digital Assets project and a substantial $2 billion investment, ADGM has showcased its commitment to fostering Web3 growth. This initiative, coupled with the involvement of significant financial institutions like the First Abu Dhabi Bank, aims to promote the development of Web3 technologies within the ADGM ecosystem.

Conclusion

The DLT Regulations signify a monumental step for the Middle Eastern territory, with Abu Dhabi aiming to position itself alongside Dubai as a crypto hub. By providing a robust legal framework for distributed ledger technology foundations, ADGM not only solidifies its global stance but also paves the way for other territories to follow suit.

 


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