Abu Dhabi negotiates on ‘Regulation Laboratory’

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) today published a public consultation paper setting out its proposal for a “Regulatory Laboratory” (“RegLab”), a tailored framework that allows firms deploying innovative technology in the financial services sector (“FinTech participants”) to conduct their activities in a controlled and cost-effective environment.

As the first initiative of its type in the Middle East and North Africa (MENA) region, the RegLab has been designed specifically to cater to the unique risks and requirements of FinTech participants, and uses extensive feedback from key local and global stakeholders. The proposed RegLab continues to promote FSRA’s objective in developing a stable and sustainable financial services sector in Abu Dhabi, while fostering innovation within tight parameters buffered by risk-proportionate regulatory safeguards.

H.E Ahmed Al Sayegh, Chairman of ADGM said, “By providing FinTech participants the certainty of obtaining relevant regulatory approvals on a stable platform where they can test or deploy new technologies, the RegLab draws on a holistic approach to support Abu Dhabi’s vision of developing an innovative financial services sector that is underpinned by robust regulatory principles. Together with our partners and key stakeholders, ADGM aims to develop an environment that harnesses FinTech’s potential to increase efficiency, widen consumer choice and facilitate better risk management in the financial services industry within Abu Dhabi and the GCC region.”

Key features of the RegLab is to address chief considerations of regulatory compliance, time-to-market and operational cost efficiency by FinTech participants, FSRA proposes a novel “blank-sheet” approach to the RegLab. Instead of being subjected to the full suite of authorisation regulation and rules from the outset, a customised set of rules will be applied, depending on the business model, technology deployed and risk-profile of the FinTech participant.

Under the RegLab framework, FinTech participants enjoy a two-year period to develop, test and launch their products and services in a controlled environment, after which FinTech participants with viable business models will be transferred to the full authorisation and supervisory regime upon successful demonstration of compliance with the authorisation criteria. Firms who are not ready after the two-year period will exit the RegLab framework.

Dedicated online FinTech portal:

As part of FSRA’s efforts to further nurture a sustainable FinTech ecosystem in Abu Dhabi, a dedicated online portal will be established. The portal acts as an additional resource to provide direct regulatory guidance to FinTech participants in helping them shape their regulatory business plans and testing scope, understand regulatory requirements and navigate the dynamic landscape.

Building Strategic Partnerships:

FSRA is also working and building strategic partnerships with local and global leading industry stakeholders, including accelerators and universities, to collaboratively cultivate local entrepreneurship and promote technology development and innovation in financial services.