The Central Bank of UAE (CBUAE) has been working on the draft regulation related to Crowdfunding Platforms, CFPs and has solicited views and feedback from experts before approving it officially.
Central Bank of UAE (CBUAE) has to make laws and regulate Crowdfunding in order to safeguard interest of consumers, and it also has to safeguard and mitigate the risks which arise due to CFPs in United Arab Emirates (UAE). Also, the new regulations take fintech business to next level. However, the new rules will not be applicable in Financial Free Zones but will be applicable.
The crowdfunding platform, CFP regulations will apply to any website based platform, a social networking site, or any other site whose sole purpose is to act as an intermediary between lenders and borrowers engaged loan based crowdfunding.
The regulation divides CFPs into two categories, i.e. Large and Small based on their lending volume. The lenders who facilitate loan of AED 5,000,000 or more while, anything less than the threshold will be categorized as small lenders.
Any entity which wishes to carry CFP loan activity will have to apply for a license with the Central Bank and upon approval will have to provide a bank guarantee equivalent to paid-up capital in addition to other compliances.
The CBUAE welcomes comments on ([email protected]), setting 10th October 2019 as the deadline.
Crowdfunding is one of the innovative methods through which anyone can raise money. The reason for raising money can either be business, someone’s medical treatment, or a cause. The way it works is it reduces the risk, and the money is usually raised from various people spread across the world via internet. Crowdfunding platforms are one of the alternate ways of raising money.