UAE drafting regulation on crowdfunding

By Eudore R. Chand

UAE Central Bank

ABU DHABI 30 September 2019: The Central Bank of UAE (CBUAE), is seeking comments and feedback from experts on a draft regulation on loan-based Crowdfunding Platforms (CFPs), before it is officially approved and issued.

Crowdfunding is solicitation of funds from persons through a platform for a specific purpose.

The apex bank says the objective of introducing this regulation is to put in place a framework for licensing, regulating and monitoring loan-based CFPs and to set out the standards that the Central Bank expects them to meet, said Wam.

The purpose of both the framework and the requirements is to:

  1. Safeguard the financial system from the risks posed by CFPs;
  2. Protect the interests of consumers in the UAE
  3. Seek the development of Fintech business in the UAE in a prudent manner

This regulation shall apply to person (s) wherever domiciled, engaging in loan-based CFP operations in the UAE except in the Financial Free Zones, the CBUAE explains.

Crowdfunding platform,CFP, is a web-based platform, social networking site or similar means used for the purpose of crowdfunding and intermediating between lenders and borrowers engaging in Loan-based Crowdfunding.

According to the regulation, CFPs are categorised according to their lending volume:

a. Category 1 (Large): Cumulative loans facilitated in a calendar year at Dh5,000,000 and above; or

b. Category 2 (Small): Cumulative loans facilitated in a calendar year are below Dh5,000,000.

An applicant wishing to undertake loan-based CFP activities must apply to the Central Bank for a license and should the application be approved, a CFP must undertake to provide a bank guarantee drawn in favour of the Central Bank and issued by a locally incorporated UAE bank of value equal to the required paid-up capital in addition to other requirements.

The CBUAE welcomes comments on (crowdfundingreg@cbuae.gov.ae), setting 10th October 2019 as the deadline for providing comments.

Dubai Gazette