Fiat-referenced Tokens in the ADGM

The Riffle

The FSRA is moving from general references to Stablecoins, to addressing them specifically. FRTs are intended to be used as a means of payment and share certain characteristics with Stored Value.

Current status - An issuer of an FRT has to seek a Money Services license, specifically for the Issuance of Stored Value.

Proposed - a new regulated activity distinct from the Issuance of Stored Value. Base capital - US$ 2 million.

Proposed definition - Digital Asset whose transfer and storage is achieved electronically through the use of DLT, which

(a) is used as a medium of exchange;

(b) achieves a stable store of value by referencing a fixed amount of a single fiat currency; and

(c) enables the holder to redeem the FRT in exchange for the amount of the fiat currency referred to in (b) from its issuer upon demand.

What’s the difference in Stored Value and FRT?

Stored Value issuer holds the proceeds from the Stored Value issuance in the form of cash - given the shorter redemption cycles.

FRTs can be distributed to a wider audience using blockchain and time between issuance and redemption can be lengthy, and hence issuer can invest proceeds of FRT issuances in high-quality liquid assets, thus earning returns while maintaining a stable value per token.

No algorithmic stablecoins will be permitted.

A more detailed analysis follows, and in the meantime, you can access the Consultation Paper here.