FSRA proposes expanded regulatory framework for fiat-referenced tokens

Acceptance and oversight of FRTs

A key component of the new framework is the FSRA's approach to "accepting" FRTs for use within the ADGM. Under the current rules, the FSRA is responsible for “accepting” FRTs and for publishing a list of “Accepted FRTs”. Under CP9, the FSRA proposes to retain this approach, albeit with some important changes.

Specifically, the FSRA proposes to automatically accept FRTs issued by issuers located in ADGM. The FSRA is also proposing to consider foreign FRTs for acceptance provided they meet certain assessment criteria. These criteria include reserve adequacy, robust AML traceability mechanisms, and the foreign issuer being subject to appropriate regulatory oversight in their home jurisdiction.

Expanded scope of regulated activities

Building on the existing framework which primarily focused on the issuance of FRTs, CP9 proposes to significantly expand the scope of regulated activities involving FRTs. This expansion is important given the new business models involving FRTs that have emerged since CP7 was published in 2024.

Specifically, the FSRA proposes to expand the Regulated Activity of Providing Custody to include FRTs. Importantly, this would bring custodians holding FRTs within the scope of the general rules in COBS relating to custody, including the Safe Custody Rules. Further, unless custodians are licensed to conduct Payment Services, they will not be able to engage in payment or remittance-type activities. This is important given one significant purpose of FRTs is as a means of payment.

Additionally, CP9 proposes to add a new Regulated Activity to cover firms acting as intermediaries in the buying and selling of FRTs on behalf of clients or issuers. This step is designed to bring greater oversight and proportionate prudential requirements to liquidity providers and other facilitators.

Refinements to TPA approval process

Currently, in order to place Reserve Investments with a Third-Party Agent (TPA), an FRT issuer is required to obtain the FSRA’s prior approval of the TPA. The framework proposes to replace this pre-approval requirement for TPAs with a notification-based system, allowing for greater efficiency while maintaining FSRA supervisory oversight.

Importantly, the FRT issuer will remain responsible for conducting sufficient due diligence upon the relevant TPA. FRT issuers should ensure they retain documentary evidence to support their assessment that the relevant TPA is suitable to carry out the assigned responsibilities.

Conclusion and next steps

CP9 represents a significant step by the FSRA to comprehensively regulate a growing segment of the digital assets market. It also reflects the ADGM's role as a leading global financial centre for FRTs. The deadline for comments on CP9 was October 7, 2025. 

Firms operating or planning to operate in the FRT space should carefully review the proposals and begin considering the implications for their business models and compliance processes. 

Should you have any queries or questions, please get in touch one of with the key contacts listed below.