As one of the leading international financial centers in the UAE, obtaining an ADGM crypto license provides a strategic advantage as well as the establishment of a financial company. Since its inception in 2015, ADGM has been ranked among the Top 25 financial centers, distinguishing itself globally. This has been made possible by a progressive SPV regime, fintech innovation, and being a pioneer in the region in developing the primary legal framework for regulating crypto assets. Therefore, businesses targeting the Abu Dhabi market, including sovereign wealth funds and family offices, will definitely be interested in such an attractive base.
Potential with an ADGM
Advantages of securing an ADGM crypto license:
Tax Incentives
- No taxes on profits, capital, or assets for 50 years from 2004.
- Employee income is tax-exempt.
Legal and Regulatory Support
- Encourages cross-border operations.
- Allows 100% foreign control.
- No barriers on hiring international talent.
- Freedom in capital repatriation.
Trust and Credibility
- Esteemed, autonomous regulatory body.
- Separate, English-based common law system, distinct from UAE’s laws.
- Emphasizes a risk-managed regulatory strategy.
Strategic Location
- Proximity to managed or owned assets for management and holding entities, and family offices.
- At the core of MEASA’s growing economic influence.
- Integral to expanding South-South trade, especially between Asia and Africa.
- Ideally positioned for leveraging emerging market opportunities.
Vibrant Community
- A nexus for regional transactions.
- Home to a dense network of global enterprises, investment and wealth management firms, banks, and financial entities.
- Host to top-tier regional and global legal, audit, and professional services.
- Emerging as a leading fund domicile.
Essential Regulatory Insights
Since June 2018, the Abu Dhabi Global Market (ADGM) has been a pioneering hub in regulating crypto-asset activities. This finance-centric free zone in Abu Dhabi offers a detailed regulatory environment for crypto-asset operators.
AML/CFT and KYC Guidelines
Enforces anti-money laundering and customer due diligence, essential for combating financial crimes.
Licensing Necessities
Operators must obtain a Financial Services Permit (FSP) to manage virtual assets within ADGM.
Regulatory Oversight
The Financial Services Regulatory Authority (FSRA) mandates adherence to AML rules for all entities, ensuring secure virtual asset transactions.
Innovative Compliance Tools
Utilization of advanced software for on-chain and off-chain data analysis aids in fulfilling anti-money laundering requirements. It simplifies the KYC process, enhancing customer and company due diligence for both retail and institutional clients.
Operational Standards for Trading Platforms
ADGM stresses the importance of market surveillance, transparent settlement processes, and comprehensive transaction recording to uphold market integrity. Crypto exchanges, recognized as Multilateral Trading Facilities (MTFs) by the FSRA, must implement effective surveillance to prevent market misconduct and financial crimes, necessitating a robust system regularly updated to keep pace with the rapidly evolving virtual asset sector.
ADGM Crypto Licensed Activities
For entities whose activities are related to the virtual asset sector, the ADGM licence covers the following areas:
- A crypto exchange license is a necessity in the case of platforms where crypto assets are traded. In addition, anti-money laundering and counter-terrorist financing principles, cybersecurity protocols, and other regulatory standards must be followed.
- A crypto asset custodian is needed to ensure the safe storage and management of clients’ crypto assets following the ADGM rules on asset security and digital security.
- Crypto asset management is the oversight and administration of crypto assets for clients, as well as transaction processing, including recordkeeping and regulatory compliance reporting.
- Trading and Rights Management in Crypto Assets — the purchase, sale and management of rights related to crypto assets, ensuring that practices comply with the ADGM fair trading rules.
- Marketing of cryptoassets requires compliance with ADGM standards for information dissemination and investor protection and concerns the advertising and promotion of cryptoassets.
ADGM and Swiss Crypto Licenses
To obtain an ADGM crypto license, one must meet the specific requirements of the Financial Services Authority (FSRA) that apply to virtual asset service providers (VASPs) in the Abu Dhabi market. Consequently, there is a tiered licensing system based on service risk, with different capital requirements and operating principles for different categories. To ensure compliance and governance, key personnel must meet experience criteria.
In the case of a crypto license in Switzerland, you need to pay attention to the establishment of a recognized business entity and work out a detailed business plan. In addition, the Swiss Financial Market Supervisory Authority (FINMA) puts a great emphasis on risk management and maintaining minimum capital to comply with management standards.
Requirements
For entities aiming to offer financial services within the Abu Dhabi Global Market (ADGM) as Virtual Asset Service Providers (VASPs), understanding the application process and compliance with the Financial Services Regulatory Authority (FSRA) requirements is crucial.
Licensing Requirements
ADGM License Categories Based on Business Activities
The FSRA categorizes licenses according to the VASP’s intended financial services. The category required depends on the risk and nature of the activities:
- Category 4 license — low-risk consulting or organizational services.
- Category 3C license — discretionary portfolio managers.
- Category 3A license — STP brokers operating based on agreed principles.
- Category 2 license — market makers or credit providers.
- Category 1 license — full-fledged banks that accept deposits.
Specific License for MTF Operations
Operating a Multilateral Trading Facility (MTF) falls under Category 4, requiring a base capital of US$ 140,000.
Compliance and Operational Standards
Trading Fairness and Security
- VASPs must establish transparent rules and procedures to guarantee fair trading and non-discriminatory service access.
- Clear criteria for the admission of securities on the trading platform are required, ensuring adequate technology resources are in place for market conduct.
Technology and Security Requirements
- MTFs must use authorized distributed ledger technology (DLT) applications that prohibit the use of privacy tokens and anonymous trading.
- Annual IT audits by independent experts are mandatory to assess compliance with network security, data storage and transmission, and the handling of soft and hard forks.
Staffing and Governance
Essential Roles and Qualifications
The FSRA specifies key positions to ensure proper governance and operational integrity:
Board of Directors
Should include a non-executive Chair with robust governance policies.
Senior Executive Officer (SEO)
A senior banking professional with over 10 years of experience, resident in the UAE.
Finance Officer (FO)
A senior finance professional, which can be from the parent company for group entities.
Risk Officer and Chief Technology Officer (CTO)
Key roles that can be outsourced, with the CTO needing specific IT expertise.
Compliance Officer (CO) and Money-Laundering Reporting Officer (MLRO)
Senior professionals with significant experience, resident in the UAE. These roles can be combined and outsourced.
Financial Requirements
Capital Necessities by ADGM License Category
- The capital requirement varies based on the license category, starting from $10,000 for Category 4 to $10 million for Category 1 firms.
- Capital calculation includes base capital, risk-based capital, and expense-based capital, with the highest figure setting the minimum requirement.
Capital Waivers and Calculations
- Capital waivers may be available for ADGM branches of institutions regulated in recognized jurisdictions.
- The actual capital may vary based on the business model, with calculations made during the regulatory business plan stage.
Stages of Obtaining a Crypto License in ADGM
Initial Application Process
- Start by familiarizing yourself with the ADGM and FSRA.
- Prepare and submit a business plan (regulatory business plan) with financial projections to the FSRA.
- Finalize the RBP based on FSRA’s comments.
- Prepare a complete application, including KYC policies, processes and documentation for key personnel.
- Submit a formal application to the FSRA for initial review.
- Conduct detailed review, including ongoing communication with FSRA and interviews with key personnel.
Final Steps for Approval
- Address any conditions set by the FSRA.
- Establish a legal entity, open a bank account for share capital, select auditors, and secure professional indemnity insurance.
- Complete the final FSRA submission to receive Financial Service Permissions.
Costs
- Listing and trading admission fees: US$ 3,000.
- A sliding-scale monthly trading levy is payable to the FSRA by virtual asset exchanges operating as MTFs.
Data Protection
Registration for data protection notification is a step in registering a new entity in ADGM, costing US$ 300 initially and for annual renewals.
Office Spaces
- A physical office lease within one of four ADGM buildings or various business centers is mandatory.
- Costs vary, with ADGM Business Centres starting at US$ 20,000 for a two-desk office and ADGM Fitted Offices beginning at US$ 55 per square foot.
Fees for ADGM Crypto License
FSRA Fees
Endorsements for Holding or Controlling Client Assets: No fee.
Authorization Fees:
- Non-Custody Intermediary Activities: USD 20,000 application fee.
- Virtual Asset Custodian & Non-Custody Intermediary: USD 40,000 application fee.
- Multilateral Trading Facility (MTF): USD 125,000 application fee.
- MTF & Virtual Asset Custodian: USD 145,000 application fee.
Annual Supervision Fees:
- Non-Custody Intermediary Activities: USD 15,000.
- Virtual Asset Custodian & Non-Custody Intermediary: USD 30,000.
- MTF: USD 60,000.
- MTF & Virtual Asset Custodian: USD 75,000.
- Note: Fees may accumulate for multiple regulated activities.
- Approved Person Appointment Fee:
- Approximately USD 500 per individual.
ADGM Fees
Registration Fee:
About USD 15,000.
Annual Fee:
Around USD 13,100.
FSRA Monthly Fee for MTFs
MTFs operating virtual asset exchanges must pay a monthly FSRA levy based on Average Daily Values (ADV):
- ADV ≤ USD 10mn: 0.0015%.
- ADV > USD 10mn and ≤ USD 50mn: 0.0012%.
- ADV > USD 50mn and ≤ USD 250mn: 0.0009%.
- ADV > USD 250mn: 0.0006%.
FAQ
What benefits does holding an ADGM crypto license provide?
An ADGM crypto license offers strategic positioning in a leading financial hub, access to innovative regulatory frameworks, and attractiveness to entities targeting Abu Dhabi’s market, including interactions with sovereign wealth funds and family offices.
How are VASP licenses categorized by the FSRA?
The FSRA assigns licenses based on a VASP’s services, ranging from Category 4 for advisory roles to Category 1 for banks, emphasizing compliance with AML/CFT, cybersecurity, and operational standards.
What are the main costs for office setup and visas under an ADGM license?
Costs include a registration fee (approximately USD 15,000), annual fees, office leasing (starting at USD 20,000), and visa expenses (Establishment Card Application at USD 630, visa fees from USD 1,500).
How is the monthly FSRA trading levy for MTFs calculated?
The levy for MTFs under an ADGM crypto licence is based on a sliding scale related to Average Daily Values (ADV), with rates decreasing as ADV increases, from 0.0015% for ADV up to USD 10 million to 0.0006% for ADV over USD 250 million.
