The demand for regulated investment structures in Virtual Assets is on the rise, and naturally, questions are arising.

A common question among fund managers and family offices is: Can I allocate assets in cryptocurrency X? What about Y?

Well, as with many legal matters, the answer is—it depends.

Understanding Crypto Investment Regulations

Before diving into ADGM’s stance on Virtual Assets, let’s set the foundation. Legal systems generally operate on multiple levels: federal, state, and municipal Laws, each with its own set of regulations. The Constitution serves as a “Supreme Law,” ensuring all other laws remain consistent with its principles.

Within this legal structure,  regulations provide operational guidelines for financial institutions.

Let’s consider a practical example: A country’s law may permit asset managers to operate. But what are the requirements to incorporate an asset management company? Is there a minimum share capital requirement? Is there a regulatory capital requirement? Is investing in any specific type of asset prohibited? Are there any employee-related requirements? And what about all the other operational questions that may arise?

To add another layer of complexity, certain jurisdictions establish specific zones, referred to as, Free Zones— special economic areas with a distinct legal framework. The United Arab Emirates (UAE) is home to multiple Free Zones, two of which, Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), are financial hubs with separate financial laws and regulations.

ADGM’s “List of Approved Virtual Assets”

A question I frequently receive from clients is: “Icaro, I want to offer my clients the opportunity to invest in Virtual Assets, but I heard that ADGM has a list of authorized Virtual Assets. How can I find it?”

Regulated financial activities often suffer from a “communication gap” between legal and investment professionals. Quite often, financial market terminology doesn’t always align with regulatory definitions, leading to misunderstandings.

This “list of Virtual Assets approved by ADGM” is one such example. Somewhere along the way, someone mentioned a “list,” others repeated it, and now many believe it exists.

In financial regulation, something similar to this can often happen:

One thing I always tell my clients—something I learned in law school, which the Virtual Assets world has also embraced—is: “Don’t trust, verify.”

When people hear about this supposed list, they instinctively start searching for it. They might recall reading about it in a report from a well-known advisory firm, hearing about it from a trusted industry professional, or even seeing it mentioned in news articles. But when they try to track it down, it’s nowhere to be found. Doubt starts creeping in: Am I searching incorrectly? Did I misinterpret something?

But, don’t worry, there is no need to panic. When dealing with laws and regulations, remember the rule: “Don’t trust, verify“. The safest way to find out which Virtual Assets are approved is to check ADGM’s Virtual Assets regulation so we can read the official list ourselves.

At this point, you’ll likely need a lawyer. Even the clearest regulation can be complex because, by nature regulations are not simple.

Even the best written regulations require careful interpretation. While they may seem clear to professionals in the field, they can still be tricky to navigate. And sometimes, we might come across regulations that are somewhat like this:

That said, ADGM’s regulations are well-written (to the joy of lawyers), though not exactly simple. Fortunately, situations like the one illustrated above don’t occur frequently.

Now, let’s dive into the heart of the matter: What exactly does ADGM’s regulation say about Approved Virtual Assets?

What ADGM’s Regulation Actually Says

To find the truth, we refer to the “Guidance on Regulation of Virtual Asset Activities in ADGM [2 January 2025]” issued by the Financial Services Regulatory Authority (FSRA). Paragraphs 24 to 30, explicitly defines what “Accepted Virtual Assets” are.

Here’s what we find:

• Paragraph 24 states that Authorized Persons can only conduct regulated activities with Accepted Virtual Assets. If that’s the case, it’s reasonable to conclude that there is a list of Accepted Virtual Assets. But we still haven’t found the answer we’re looking for… Let’s keep investigating the regulation.
• Paragraph 25 clarifies that the”Accepted Virtual Assets” are those that meet the FSRA’s requirements, as demonstrated by an individual Authorized Person, for that individual Authorized Person only.

Well, here we start to get a clue about the so-called “list of authorized virtual assets.” If the regulation states that an Accepted Virtual Asset is a Virtual Asset that meets the FSRA’s requirements, as demonstrated by the Authorized Person and solely for that Authorized Person, how can there be a list? Is there a list for each Authorized Person? Moreover, the paragraph states that the Authorized Person must demonstrate that the Virtual Asset meets the FSRA’s requirements. What are these requirements?

We can find the requirements directly in paragraph 25, which are: maturity, security, traceability/monitoring, Exchange connectivity, type of distributed ledger (DLT), innovation/efficiency, practical application/functionality. All of these requirements are defined in the regulation and deserve a separate article on their own. Since we’re looking for the list of Accepted Virtual Assets here, we won’t explore these requirements in detail to stay focused.

And then in the final paragraph of the chapter, we hit the defining moment.

And believe me, yes. That’s exactly the case. The much-sought-after list of Accepted Virtual Assets is exactly in the last paragraph of the chapter that defines these assets, within the Guidance on Regulation of Virtual Asset Activities in ADGM [2 January 2025] issued by the regulatory authority, and to everyone’s delight, we’re faced with an exceptionally well-written, clear, and direct provision. Quoting the defining paragraph of our final gasp in this search:

“Due to Accepted Virtual Assets being determined for use on the basis of each individual Authorised Person, the FSRA will not maintain a ‘public’ list of Accepted Virtual Assets.”

The Unexpected Plot Twist

That’s right—there is no official public list of Accepted Virtual Assets.

Calm down, dear readers. Yes, this is the truth. It seems like we’re at the end of a Netflix show, doesn’t it? With an extremely unexpected ending, where the writer simply played with the viewer’s imagination, keeping our attention in a gripping plot, only to deliver something completely unexpected in the end.

And even though you might be thinking, “This can’t be,” the final outcome is excellent, and I’ll tell you why. Imagine that you identified an investment opportunity in Virtual Asset “X” and that predefined list existed. Simple, right? You would just look for the asset on the list, add it to your portfolio, and that’s it.

But what if the “X” was not on the list? You identified an investment opportunity that makes a lot of sense for your business and your clients, but because of a regulatory bureaucracy, you won’t be able to offer it.

Do you see how the non-existence of a list is practically the perfect scenario for this type of regulation? You only need to submit your authorization request for a particular Virtual Asset to the FSRA, demonstrating that the requirements in paragraph 25 have been met, and you’ll be able to offer it to your clients.

This doesn’t mean that ADGM is prevented from releasing materials informing that a Virtual Asset has been considered accepted, but now you know: it was considered accepted within the operations of a specific Authorized Person.

And so, we come to the end of our story. A much better ending than what we were looking for at the start of our reading. An ending that allows us much greater flexibility in regulated financial businesses involving Virtual Assets than we initially had in mind when we were searching for that list.

Welcome to the world of Virtual Asset regulation, where pleasant surprises can be found, provided you are well-advised in obtaining and maintaining your licenses.

Click here, and get your digital collectible related to this article.

Banks Legal, your Digital Assets Legal Consultancy firm in the UAE.

Ícaro Avelar. Seasoned Legal Counsel, providing legal support for web3 companies since 2017 in corporate structure and regulatory matters. Email: icaro@bankslegal-adgm.com.