ABU DHABI, 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. 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,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 AED 5,000,000 and above; or b. Category 2 (Small): Cumulative loans facilitated in a calendar year are below AED 5,000,000.
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 (email@example.com), setting 10th October 2019 as the deadline for providing comments.
Source: Emirates News Agency