The Capital Market Authority (CMA) of the Sultanate of Oman has initiated a public consultation in a bid to gather industry perspectives on its proposal to establish a new regulatory framework that governs transactions involving Virtual Assets (VA) and operations of Virtual Asset Service Providers (VASP). This significant step represents Oman’s efforts to regulate activities and transactions involving crypto assets, tokens, crypto exchanges, and initial coin offerings.
According to the CMA, the regulatory framework aims to establish a comprehensive yet adaptable regime for the rapidly evolving VA sector. The proposed framework includes prudential and business conduct requirements, rules to prevent market abuse, surveillance, and enforcement mechanisms, and guidelines around the issuance of virtual assets.
The CMA is offering an alternative financing and investment platform for issuers and investors while simultaneously aiming to mitigate the associated risks with this VA class. The consultation process invites contributions from all relevant stakeholders, including VASPs, financial institutions, academics, legal firms, consumer groups, and businesses that may be impacted by the VA and VASP frameworks.
Banning privacy coins and obligations of VASPs
Oman is part of a growing list of jurisdictions formulating regulations to control crypto asset-based activities. Virtual assets, according to the Financial Action Task Force (FATF), can be vulnerable to cyberattacks and scams if left unregulated. There are also concerns that they can become a haven for criminals and terrorists for financial transactions.
A key aspect of Oman’s proposed regulatory framework is its intent to strictly prohibit the issuance of ‘privacy coins,’ which are virtual assets known for reduced transparency and increased obfuscation of financial flows. The CMA warns that privacy coins have been linked to illicit activities such as money laundering and organized crime.
VASPs operating in Oman will be required to establish a local presence in the jurisdiction through a legally constituted entity and a physical place of work. The consultation paper includes detailed proposals on regulatory and licensing requirements for VASPs, corporate governance, risk management, and virtual asset issuance.
The consultation paper, published on July 27, includes 26 questions for stakeholders to provide their insights and opinions. The public is encouraged to submit their responses to the consultation paper by August 17, 2023. After the consultation phase, the CMA plans to draft and finalize the regulatory framework, signaling a significant step forward in the Sultanate’s digital economy.
Conclusion
The announcement of the public consultation is a result of a series of discussions and initiatives aimed at regulating the virtual asset industry in Oman, which began as early as November 2020. This move indicates the CMA’s proactive approach to adapting to the dynamic changes in the virtual asset space, demonstrating its commitment to offering a secure and regulated environment for virtual asset transactions in the Sultanate.
