Oman regulator seeks feedback on virtual asset framework.

Oman regulator seeks feedback on virtual asset framework.

Oman’s Path Towards Regulating Virtual Assets

The Sultanate of Oman is taking steps towards establishing its own regulations for virtual assets, including cryptocurrencies. The country’s financial markets regulator, the Capital Market Authority (CMA), has released a consultation paper seeking input from industry stakeholders on its proposed regulatory framework. This framework aims to create a comprehensive regime for the virtual asset sector, encompassing various business requirements and Market Abuse Prevention measures.

The CMA’s goal is clear: to provide an alternative financing and investment platform while mitigating the risks associated with virtual assets. As the popularity and adoption of cryptocurrencies and other digital currencies continue to grow globally, Oman recognizes the need to establish a clear framework to govern this emerging industry.

The Scope of the Proposed Regulatory Framework

The consultation paper outlines the CMA’s proposed framework for virtual assets. It includes regulations and licensing requirements for Virtual Asset Service Providers (VASPs), corporate governance standards, risk management guidelines, and virtual asset issuance procedures. The framework intends to cover various types of virtual assets, including utility tokens, security tokens, fiat-backed and asset-backed stablecoins, and other digital currencies falling under the Financial Action Task Force’s definition of virtual assets.

However, the issuance of privacy coins is still under consideration, pending public feedback. Privacy coins, known for their enhanced privacy features, have sparked concerns among regulators due to their potential misuse in illicit activities. The CMA is actively seeking opinions from the public to make an informed decision on whether to permit or ban the issuance of privacy coins within the proposed framework.

Key Points of the Proposed Regulatory Framework

The consultation paper raises several important points that will shape the regulatory landscape for virtual assets in Oman:

  1. Regulatory and Licensing Requirements for VASPs: The CMA may require VASPs to establish a local presence in Oman, including a legally established entity and physical office. Additionally, VASPs might be subjected to minimum capital requirements to ensure their financial stability and regulatory compliance.

  2. Asset Safeguarding and Auditing: Virtual asset firms might be required to hold only a small percentage of their assets in hot wallets, which are connected to the internet and more vulnerable to hacking. The framework may also introduce requirements for regular audits of safeguarded assets and proof of reserves to enhance transparency.

  3. Public Feedback and Transparency: The CMA has actively encouraged industry stakeholders and the public to provide feedback on the consultation paper. Key opinions and feedback will be posted on the CMA website, demonstrating a commitment to transparency and inclusiveness in the regulatory development process.

The Road to Regulation

The process of establishing virtual asset regulations in Oman has been ongoing for some time. While the CMA publicly announced its intention to develop a regulatory framework in February, discussions on regulating the virtual asset industry began even earlier. In November 2020, the National Committee for Combating Money Laundering and Terrorist Financing formed a task force comprising officials from the CMA and the Central Bank of Oman to study the implications of permitting or banning virtual asset activities. Consultants were later enlisted in December 2022 to assist in setting up the new regulatory regime.

Conclusion

Oman’s initiative to develop a regulatory framework for virtual assets marks its proactive approach to embrace and manage the emerging blockchain industry. By seeking input from industry stakeholders and the public, the Sultanate aims to create a balanced and effective regulatory regime that fosters innovation while protecting investors and mitigating risks.

The consultation paper’s release is a significant step towards formalizing virtual asset regulations in Oman. The CMA will carefully review the feedback received and consider it in the finalization of the regulatory framework. Ultimately, this framework will provide clarity and confidence to businesses and individuals engaging in virtual asset activities within the country, contributing to the growth and maturation of the blockchain industry in Oman.