FRTs are a category of stablecoins that are backed by high-quality, liquid assets denominated in the same currency as the FRT and that can be liquidated rapidly with minimal adverse price effect. FRTs are intended to be used as a means of payment and share certain characteristics with Stored Value.
Since the introduction of its original regulatory framework in 2018 for digital assets, the FSRA’s treatment of them has evolved significantly to reflect advances in this area. While the most recent version of the FSRA’s “Guidance – Regulation of Virtual Asset Activities in ADGM” (December 2023) discussed stablecoins in general and distinguished them from Virtual Assets, the FSRA’s legislation will now specifically address FRTs and their issuance.
The FSRA is proposing to adopt a risk-based and proportionate approach to FRT issuance in response to industry demand, based on appropriate regulatory requirements that incorporate the necessary safeguards to ensure that FRT issuers operate in a safe and sound manner and informed by current practices in leading jurisdictions. Issuance of FRTs would constitute a new Regulated Activity, distinct from the issuance of Stored Value within the Financial Services and Markets Regulations 2015 (“FSMR”), with commensurate conduct of business and prudential requirements.
The consultation period will close on 3 October 2024.
To view the consultation materials please click: Consultation Paper No. 7 of 2024 – Proposed Regulatory Framework for the Issuance of Fiat-Referenced Tokens.
Featured image credit: edited from ADGM
