The world is split in half on initial coin offerings. The proponents hail it as the most effective way to raise capital by companies while the opponents cite the many loopholes in ICOs as the reason they would never work. However, for the United Arab Emirates, ICOs present the best way to boost its capital markets. As reported by Reuters, the oil-rich country intends on approving ICOs beginning next year to boost corporate funding as it seeks to give its companies a new leash of life. UAE plans on coming up with comprehensive regulations to govern the issuance of ICOs to prevent their possible use to defraud investors as has been the case in the past.
While not everyone has accepted ICOs as the best fundraising method as there are quite a number of loopholes that can be exploited to defraud investors, everyone certainly agrees that they are the most effective and easily executable fundraising method. ICOs take away the hustle of an IPO which is usually expensive to hold and which excludes many retail investors. And it’s the effectiveness of ICOs that UAE is banking on as it plans on approving ICOs as securities.
According to the country’s head of the securities regulator, the plan should hit the ground early next year. As reported by Reuters, Obaid Saif al-Zaabi stated in a recently-held seminar:
“The board of the Emirates Securities & Commodities Authority has approved considering ICOs as securities. As per our plan we should have regulations on the ground in the first half of 2019
The ESCA has been working with international advisers to formulate regulations for the industry, al-Zaabi further revealed. The regulator has also been working with the Dubai and Abu Dhabi stock markets which will be the first to offer the ICO issuance platforms.
While UAE is a very strong economy and has some giant multinational conglomerates, low oil prices in the past few years have had a far-reaching negative effect on the IPOs issued. This has forced the government to seek new methods to revive the capital markets and it has settled on ICOs.
Among the other measures the government plans on taking include facilitating “IPOs in which family owners sell majority or 100 percent stakes in the companies they control,” al-Zaabi revealed. Listed companies will also have to include at least 20 percent women in their boards. The Ministry of Economy has already written to the Prime Minister on these reforms and is awaiting the go-ahead.
The move will do a world of good for the embattled ICOs at a time when they are at a cross-road. Having risen to prominence in 2017, they quickly became a favorite crowdfunding method for many startups. However, a few unscrupulous people who defrauded millions of dollars from investors have given them a bad name.
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