The Registration Authority of Abu Dhabi Global Market (ADGM) has recently released a consultation paper that proposes a legal framework for Distributed Ledger Technology (DLT). The authority aims to gather public opinions and comments on the proposals before finalizing the new regime.
Key proposals for DLT foundations
The main aspects of the new framework revolve around the structure of DLT foundations, governance and control, tokens, token-holder voting, reporting and disclosures, beneficiaries, profit distribution, supervision, liquidation or voluntary strike-off, and insolvency. The deadline for public feedback on the proposed framework is set for Friday, 12 May 2023.
The consultation paper suggests there is an opportunity for ADGM to design a new framework specifically for DLT Foundations, incorporating attractive features for developers of DLT projects. Instead of amending ADGM’s existing foundations regime, the proposal supports the creation of a standalone DLT foundations framework. Regarding initial asset value, the proposal states that “DLT Foundations shall have a minimum initial asset value of USD 25,000.”
Recognizing token holders’ legal status and ensuring transparency
The proposed framework acknowledges the legal status of token holders, stating that “decentralized governance is expressly provided for, with token-holders having the right to vote on certain matters, unless expressly stated otherwise in the Charter.” Additionally, the proposal emphasizes the importance of transparency, fairness, and the submission of audited annual accounts.
The consultation paper does not propose any specific marketing obligations. However, it grants the Registrar the authority to impose temporary prohibition orders on marketing for public policy reasons. The proposed framework demonstrates ADGM RA’s recognition of the suitability of foundation structures for DLT projects and its alignment with ADGM’s plan to support and foster crypto and DeFi-related developments
