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UAE cbank seeks comments on crowdfunding draft

ABU DHABI, September 30, 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.

The apex bank said 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, reported Emirates news agency Wam.

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

The purpose of both the framework and the requirements is to: safeguard the financial system from the risks posed by CFPs; and protect the interests of consumers in the UAE. It also seeks 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 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 has set October 10 as the deadline for providing comments.




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