ADGM invites applications for 5th Reglab Cohort focused on decentralised Web 3.0, token economy

Successful applicants will receive the sandbox licence to test smart contracts enabled by blockchain and virtual assets in the digital testing environment of ADGM’s Digital Lab, under the guidance of ADGM’s financial services regulator.

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has opened its Regulatory Laboratory (RegLab) sandbox programme for the 5th cohort of applications today. The 5th Reglab application is open until July 15, 2022 and will focus on innovation in financial services powered by decentralised applications and protocols.

ADGM’s Reglab is a tailored regulatory regime for fintech participants which is designed to foster innovation within the UAE financial services market, for both new entrants and existing financial and regulated companies. The theme of the 5th Reglab is “DeFi”, an emerging part of the global financial ecosystem that holds the promise of delivering more efficient and tailored financial services.

DeFi has gained traction in recent years and created opportunities to transform the delivery of financial services. DeFi enables direct access to financial services without the need for an intermediary financial institution by interacting with smart contracts based on distributed ledger technology (DLT) and virtual assets, thereby reducing intermediation costs. For instance, a decentralised autonomous organisation (DAO) that operates a multi-signature wallet to manage community treasuries can be a form of DeFi. The development of robust and efficient DeFi services can help develop a strong foundation for Web 3.0 by creating an effective mechanism for managing the transfer of value between decentralised Web 3.0 services.

While DeFi has the potential to positively impact the financial services sector, it has some associated risks. The FSRA recently issued a discussion paper to establish a dialogue with the industry, which can provide valuable insights for the FSRA in developing future policy choices to address these risks through appropriate regulations. Any future regulatory framework must ensure the relevant risks are mitigated, in order to fully realise the potential benefits of DeFi.

Testing DeFi Solutions on ADGM’s Digital Sandbox Infrastructure