As Reglex expands our Enforcement Database offering to include the Abu Dhabi Global Market (ADGM), we invite you to explore the United Arab Emirates (UAE), a federation of seven vibrant emirates that has become a thrilling epicentre for trade, finance, and groundbreaking innovation. With its diverse and dynamic economy, the UAE offers a multitude of opportunities and challenges for financial services providers and consumers alike. Join us as we delve into the exciting landscape of financial regulations in the UAE, shining a spotlight on key regulatory authorities.
The Financial Services Regulatory Authority and the Abu Dhabi Global Market
The Financial Services Regulatory Authority (FSRA) is the financial regulator and supervisor of all financial services entities that operate within the ADGM, a financial free zone located in the emirate of Abu Dhabi. The ADGM was established in 2013 as an international financial centre that offers a progressive and transparent legal and regulatory framework, based on common law principles and internationally recognised standards and best practices. The FSRA’s regulatory framework covers various financial activities and services, such as banking, insurance, asset management, capital markets, fintech, cryptoassets, and open banking. The FSRA’s objectives are to foster a fair, efficient, and responsive regulatory environment for its market participants and stakeholders, both in the UAE and internationally, and to safeguard the integrity and stability of the ADGM as a financial centre.
The FSRA has an open and progressive approach in the maintenance and development of its regulatory framework, looking towards the international standard-setting bodies and responding to market innovations. The FSRA also engages in meaningful stakeholder consultation when considering amendments to its regulatory framework. The FSRA’s website provides more information on its regulations, rules, guidance, policies, and procedures.
The Differences between the ADGM and the DIFC
The Dubai International Financial Centre (DIFC) is the other financial free zone in the UAE, located in the emirate of Dubai. The DIFC was established in 2002 as a global financial hub that offers a sophisticated and comprehensive legal and regulatory environment for financial services providers. The DIFC’s financial regulator is the Dubai Financial Services Authority (DFSA), which regulates and supervises all financial services activities conducted in or from the DIFC.
Both the ADGM and the DIFC are onshore financial centres that have independent jurisdictions exempted from the UAE’s civil and commercial laws(the onshore regulators operate under UAE Federal Law). They both offer access to funds, infrastructure, talent, and a robust regulatory environment for financial services providers. they both have similar structures, consisting of three independent components: a registration or authority body, a financial regulator, and a court system.
However, there are some key differences between the ADGM and the DIFC that may influence the choice of jurisdiction for potential applicants wishing to provide financial services from a financial free zone. Some of these differences are:
- Application of English law: The ADGM directly adopts selected pieces of English legislation and applies English common law, subject to certain conditions. The ADGM courts generally recognise English equitable legal principles and the concept of trusts. The DIFC does not directly incorporate English common law but enacts its own laws and regulations that are primarily based on English law. The DIFC courts do not follow English court precedents but have created their own case law.
- Authorisation of financial services: The FSRA categorises applicants based on the financial services that they intend to carry out from the ADGM. There are five categories that cover all financial services activities. The DFSA also categorises applicants based on their financial services activities but has different categories for different types of activities, such as banking, insurance, asset management, etc.
- Cost of operating: The major costs involved in operating in either jurisdiction include fees payable to the respective regulators and authorities, as well as office space leases. The fees vary depending on the type and category of activity or service provided. Generally speaking, the fees charged by the FSRA are lower than those charged by the DFSA. Both jurisdictions offer cost-effective business centre options for smaller entities.
- Fintech: Both jurisdictions have advanced regulatory frameworks for fintech activities and services, such as cryptoassets, open banking, robo-advisory, crowdfunding, etc. However, the ADGM has been more proactive and innovative in developing its fintech ecosystem, offering various initiatives such as a regulatory sandbox (RegLab), a digital sandbox (Digital Lab), a fintech innovation platform (ADGM Digital), a fintech awards program (FinTech Abu Dhabi Innovation Challenge), etc.
Virtual Assets Regulatory Authority
The Virtual Assets Regulatory Authority (VARA) is the world’s first specialist regulator for virtual assets, which are defined as digital representations of value that can be digitally traded or transferred and can be used for payment or investment purposes. VARA was launched in 2023 as part of the Dubai Future District initiative to position Dubai as a global leader in the emerging world of virtual assets. VARA is responsible for regulating and overseeing the provision, use, and exchange of virtual assets in and from the emirate of Dubai.
VARA’s mission is to empower innovation through responsible regulation of the virtual assets industry, by creating a transparent and trusted guiding authority that protects consumers, investors, and market integrity. VARA aims to take its mission global by creating an easy to replicate framework to regulate the industry. VARA’s website provides more information on its vision, values, and objectives.
Conclusion
The UAE’s financial regulations landscape is evolving to meet the needs and expectations of the local and global markets. The FSRA and the ADGM are progressive and responsive regulators that offer a conducive environment for financial services providers and consumers. The ADGM and the DIFC are both attractive jurisdictions for setting up a financial services business, but they have some differences that may affect the decision-making process. VARA is a pioneering regulator that sets a new standard for the regulation of virtual assets. The UAE’s financial regulations landscape reflects its ambition and vision to be at the forefront of financial innovation and excellence.
How Reglex is helping
With the UAE rapidly becoming a prominent financial hub, especially in the realm of digital assets, we have added the ADGM’s FSRA’s notices in our enforcement database. This gives you convenient access to the jurisdiction’s regulatory appetite and governing insight. We will be adding more UAE regulators in due course.
Access our enforcement database here: https://www.reglex.io/enforcement_notices/
For all-encompassing resources on the UAE, click here: https://www.reglex.io/general/
Sources
ADGM website, www.adgm.com
FSRA website, https://www.adgm.com/financial-services-regulatory-authority
VARA website, https://www.vara.ae/en/
DIFC website, www.difc.ae
Does the application of the English Common Law work in ADGM and DIFC? Which is the impact on Commercial Arbitration cases? Adv, Antonio M. Varvaro FCIArb -CArb
Law No. (4) of 2022, Regulating Virtual Assets in the Emirate of Dubai
