Abu Dhabi Regulates Cryptocurrency Mining as a Licensed Commercial Activity

The Registration Authority of Abu Dhabi Global Market (ADGM) has issued guidance regarding cryptocurrency mining within or from the international financial center, the first of its kind for a financial center in the region. The guidance classifies mining as a licensable commercial activity overseen by the Registration Authority, rather than a regulated financial service.

The Authority adopted a technology-neutral approach encompassing Proof of Work and Proof of Stake mechanisms, aiming to ensure responsible mining practices. The guidance applies to companies and individuals engaging in mining within or from ADGM.

The guidance represents the first phase of broader plans to develop the mining sector in the financial center. In a second phase, the Authority intends to formulate detailed mining regulations, commencing a market consultation in due course. The guidance comes after an eight-week consultation published earlier this year that received substantial feedback.

Rashid Al Blooshi, Chief Executive Officer of the Registration Authority at ADGM, stated that the guidance means the market is open for responsible cryptocurrency mining, providing operators with a clear pathway for commercial licensing, oversight proportionate to scale and risk, and certainty regarding regulatory scope boundaries. He added that Abu Dhabi views mining as an intersection of energy, technology, and capital.

What Do These Terms Mean?

Cryptocurrency Mining: The process of running computers to solve mathematical problems and verify transactions on a crypto network, in exchange for new coins or fees.

Proof of Work: A mechanism that requires miners to consume computational power to prove effort before validating a new block on the network.

Proof of Stake: An alternative mechanism that relies on locking up a quantity of cryptocurrency as collateral instead of consuming energy, to select who validates transactions.