Oman’s Capital Market Authority (CMA) has officially started a public consultation process to gauge industry feedback on a proposed new regulatory framework for Virtual Assets (VA) and Virtual Asset Service Providers (VASP) within the country.
The new framework intends to establish a structured yet adaptable set of rules for the burgeoning VA sector, encompassing crypto assets, tokens, crypto exchanges, and initial coin offerings. The proposed regulations aim to provide both prudential and conduct of business requirements, with specific rules set to combat market abuse, including through surveillance and enforcement mechanisms. A primary goal is to offer an alternative financing and investment platform for issuers and investors while mitigating risks associated with virtual assets.
This comes in the wake of a global trend of regulators seeking to enforce guidelines and rules surrounding crypto assets. Notably, the CMA’s framework intends to strictly prohibit the issuance of ‘privacy coins,’ linked to illicit activities like money laundering and organized crime, and other activities associated with these coins, like using tumblers, mixers, or privacy-enhanced wallets.
Relevant stakeholders, such as VASPs, financial institutions, legal firms, and consumer groups, have been invited to participate in the three-week-long consultation. Feedback can be sent via email until August 17, 2023.
Key aspects of the proposed regulations and international perspective
The proposed framework is broad and includes various facets of the virtual asset world. The International Monetary Fund (IMF) and the Financial Action Task Force (FATF) have previously warned about the vulnerability of Virtual Assets to cyberattacks, scams, and their potential use by criminals. Following this international sentiment, Oman joins the ranks of countries that are making strides to regulate crypto asset-based activities.
The consultation paper, published on July 27, includes 26 questions and covers proposals on regulatory and licensing requirements for VASPs, risk management, and virtual asset issuance. The document also outlines the scope of the framework, encompassing utility tokens, security tokens, fiat-backed, and asset-backed stablecoins.
Specific requirements, such as establishing a local presence in Oman through a legally registered entity and physical office, may be imposed on VASPs. Additionally, the CMA is considering rules that might require virtual asset firms to hold only a low percentage of assets in hot wallets and demonstrate proof of reserves.
Oman’s journey towards regulating the virtual asset industry began as early as November 2020, with the formation of a task force to study whether to ban or permit virtual asset activities. With the recent public announcement and the ongoing consultation phase, the Sultanate is closer to finalizing its regulatory framework, reflecting a well-thought-out approach to the complex world of digital assets.
In summary, Oman’s approach to regulating virtual assets is a significant step in acknowledging and integrating this new class of financial instruments into its legal framework. The detailed consultation paper and the subsequent collaboration with industry stakeholders show a balanced perspective, aiming to foster growth while managing risks and adhering to international guidelines and best practices.