ADGM proposes new rules for peer-to-peer lending

Financial watchdog Abu Dhabi Global Market (ADGM) has published a draft paper outlining a regulatory framework for private financing platforms (PFPs).

These peer-to-peer online platforms have become an increasingly popular form of alternative financing for new companies seeking to raise capital from institutional and private investors. The types of fund raising available can include equity crowdfunding, business to business lending and private placements.

The ADGM’s draft has been partly based on feedback from a discussion paper launched by Abu Dhabi’s Financial Services Regulatory Authority in March. The proposed rules come a month after the ADGM introduced a new regulatory framework for crypto asset activities.

The ADGM’s PFP framework proposes the creation of a new “regulated activity” to cover both investment-based and loan-based PFP transactions. These transactions may be held by lenders or investors directly or via a number of special purpose vehicles.

Any PFP transactions will be restricted to “professional clients” with any retail-targeted transactions only allowed in an exceptional basis. PFP operators will also have to prove they have adequate systems and controls, due diligence on their counterparties and are able to safeguard assets.

The ADGM has set a deadline of August 16 for any feedback from the market.

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