The two poles of centralization and decentralization have been as old as the human civilization in itself. Capitalism & Socialism, Presidential and Parliamentarian are all the forms of centralization/ decentralization debate that have existed for times immemorial. Without getting into the merits of whether and which systems failed and worked, what is essential to see here is that with the new form of economy that blockchain and cryptocurrencies offer, the pivot of the decentralized dream is partly about society going to the next level, where layers of the value draining middle-men are gone. Treat this technology as the digital version of your teenage child who needs to be disciplined but not belittled. Take dot-come bubble for example - Dot Com bubble is often blamed for a waste of hundreds and thousands of billions on the growth, usage and adaption of internet. But what it gave the world was a decade of uninterrupted capital liquidity for the technology to grow, be speculated, make its own mistakes, survive and then, truly revolutionize how the economy functions!



Like in the case of Dot-com, with the advent of any new technology what is essential to identify is the bye-products of the technology that you would or should to regulate. Let’s look at the use-cases from Singapore, Malta, Japan and UAE


Singapore is widely viewed as Fintech Hub that strategically aims at becoming smart financial Centre and the first smart nation. There is no specific regulation in relation to use of distributed ledger technology ("DLT") in Singapore.

However, MAS has specifically issued a guideline for digital token offerings. Further, any digital tokens deemed to be 'capital markets products' can be regulated pursuant to Securities and Futures Act (SFA) and the Financial Advisers Act (FAA). MAS also issued a statement to this effect.

The MAS earlier this October also released a consultation paper on the creation of pre-defined sandboxes, known as Sandbox Express, to complement the existing FinTech Regulatory Sandbox that was launched in 2016.

Despite being the leading tech and banking hub of the far east, Singapore till date, does not have a regulation dedicated to cryptocurrencies, ICOs/STOs or even blockchain in general. But what it does have is a conducive environment for tech companies to thrive and atleast ‘exist’.



Malta already enjoys a solid reputation as a financial services hub within the European Union; extending this prestige to the fintech world appears to be a natural progression for this tiny state. The first of their kind in the world, three bills have come into force in Malta governing cryptocurrencies, blockchain and DLT.

The Maltese Virtual Financial Assets Act (“VFA Act”) came into force on November 1, 2018 to regulate issuance and allotment of Virtual Financial Assets (“VFAs”). The Act also recognizes other forms of DLT Assets (apart from Virtual Financial Assets). These DLT Assets include ‘virtual tokens’, ‘virtual financial asset’, ‘electronic money’ and ‘financial instrument’.

For the purposes of the VFA Act, virtual token is “a form of digital medium recordation whose utility, value or application is restricted solely to the acquisition of goods or services" while a virtual financial asset is defined strikingly similar to a cryptocurrency. The law also provides for a framework to regulate the issuance of qualifying VFA by providing of a review of the whitepaper and project by the authorities through a registered VFA Agent.

On the other hand, a ‘Financial Instrument’ is an instrument which is listed as an instrument under the other laws of Malta. One of the interesting requirements is that each issuer needs to make his financial history public.

Additionally, The Malta Digital Innovation Authority Act (MDIA)- Stipulates the setup of an industry-specific body, governing the development as well as the implementation of certain guiding principles set forth in the Act. The newly formulated body will also have regulatory functions. The body is to be known as the “Malta Digital Innovation Authority.”

Similarly, the Innovative Technology Arrangements and Services Act (ITASA), defines blockchain-based enterprises and makes them recognizable in the eyes of the law. It is designated to serve as the basis for the operation of the previous two laws. A take on the Maltese VFA would be that the Act is simple, crisp and make does best with the existing resources.

For instance, Article 4 of the Act, requires the Whitepaper and the details of the project to be registered with the regulators through the local service agents and obtain a seal of approval on the same. But read the first paragraph again, the VFA Act practically, ‘only’ regulates the virtual financial assets, while also providing a guidance on the other DLT Assets. The Act further stipulates that the Virtual Tokens remain unregulated.

To sum up, Malta hasn’t exactly introduced a new regulation for tokensisation of Financial Instruments or E-Money, but it has tried to bring it under the purview of the existing framework, while only regulating the Virtual Financial Assets within the VFA Act.



Virtual currencies in Japan are governed by Payment Services Act (PSA). The definition of a Virtual Currency is divided into two types under amended PSA as Type 1 virtual currency and Type 2 virtual currency. Amendments have also been made to the Payment Services Act, which require cryptocurrency exchanges to be registered with the FSA in order to operate – a process which imposes stricter requirements around both cybersecurity and AML/CFT.

What makes the Japanese regulatory model interesting is that Japanese cryptocurrency exchange platform Coincheck was hacked in January 2018, resulting in the theft of more than $500 million worth of crypto. As the aftermath of Coincheck scandal, the Financial Services Authority of Japan ("Japanese FSA") conducted on-site inspections and examinations at various ongoing virtual currency exchange service providers (both registered and those deemed as such by the Payment Services Act) in March and April this year.

The Japanese FSA discovered instances of non-compliance with critical requirements by not only many of the deemed virtual currency exchange service providers but also some of the registered providers. As a response, Japan’s Virtual Currency Exchange Association (JVCEA), a partnership made up of sixteen exchanges in Japan adopted a set of self-regulatory principles.

Eventually the Japanese FSA in October this year, gave the cryptocurrency industry self-regulatory status, permitting the JVCEA to police and sanction exchanges for any violations. The Japanse VFA further allowed the JVCEA, the means to create guidelines for domestic exchanges including strict measures to curb insider trading and money laundering while implementing security standards to safeguard customer assets.

So although Japan’s cognizance stemmed from an unfortunate hack, the lesson to be learnt from Japan is to learn from your mistakes. Promoting self-regulation is an absolute need of the hour. Japanese FSA sets a fantastic example of a regulator which revisited it's approach for the larger public good. An active regulator is really what we all want!



“Distributed Ledger Technology (DLT) has extraordinarily wide application to financial services and markets as a whole. Virtual tokens, at their most basic, are pieces of information recorded on a DLT network. Among others, tokens can represent a medium of exchange such as a virtual currency, a regulated financial instrument such as a share, or a person’s identity record. A “one size fits all” approach to virtual tokens is therefore inappropriate. In this Guidance, FSRA sets out its approach to ICOs and virtual currencies to offer regulatory clarifications on using such technology in its jurisdiction.” - ADGM Press Release dated 09 October 2017

Last year, the Abu Dhabi Global Market ("ADGM"), the International Financial Centre in Abu Dhabi issued a guidance on initial coin or token offerings to raise funds. In June, 2018, ADGM launched its framework to regulate spot crypto asset activities, including those undertaken by exchanges, custodians and other intermediaries in ADGM. ADGM introduces a new Regulated Activity of Operating a Crypto Asset Business ("OCAB") under its Financial Services and Markets Regulations 2015 (“FSMR”).

Under the framework, ADGM retains the right to determine what qualifies for an OCAB license and what constitutes as an 'Accepted Crypto Assets'. Abu Dhabi also announced an initiative to launch a FinTech digital sandbox a year ago. ADGM has introduced ‘RegLab’ as a tailored regulatory regime for FinTech participants.

Other than ADGM, Emirates Securities and Commodities Authority ("SCA") Approved the Fintech Regulatory Framework (Fintech Regulatory Sandbox Guidelines) for Fintech start-ups this year. Similarly, the Dubai International Financial Centre ("DIFC") through its regulatory arm DFSA, announced in May 2018, that it will allow financial technology firms to apply for an Innovation Testing License (ITL).

In addition to innovation, the UAE supports the start-up and innovation environment through its 45 odd Freezones and 100s of accelerators and incubator programmes like including those by the Masdar City, Dtech and Kryptolabs.

UAE to say the least has been extremely enthusiastic and receptive of the technology. ADGM's framework is comprehensive, and coupled with a sandbox regime, provides multiple avenues for DLT/Blockchain/Crypto based projects. Similarly, SCA and DIFC's sandboxes add on to the conducive environment. Having said that, ADGM's Framework rests heavily on the market capitalization, traceability and volatility of the 'Crypto Assets' . Therefore the regulator retains unilateral control in determining whether or not a project deserves to be licensed and regulated.




ADGM and Malta like many other countries have focused on regulating the crypto/ virtual assets. Both ADGM's Spot-Crypto Asset Framework and Maltese VFA Act, are good examples of forward thinking regulators, who have, to say the least, attempted to venture into the unknown. ADGM particularly seems to have focussed on licensing of only the 'real projects' with it's multi faceted parameters.

As far as the ecosystem is concerned, Singapore any day leads the band-wagon. An early entrant in this space, Singapore has smoothly blended Fintech and DLT, and has hence kept the market alive.

Japan on the other hand sets a beautiful example of creating a 'learned' self-regulatory approach - something that has been hotly debated for years in this space.

What remains to be seen is, whether countries like Japan will be successful at such an attempt - and culturally, can it even be pulled-off anywhere else?



Authored by Akshata Namjoshi (Senior Associate)


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