ADGM Wants Regulated Firms to Treat DeFi Like a Risk They Have to Explain
ADGM's FSRA has proposed guidance for regulated firms engaging with DeFi protocols and venues, covering due diligence, governance, monitoring, financial crime, incident escalation and client assets. The consultation remains open until November 30, so the proposed expectations are not yet final.
Arabian Current
What happened
The FSRA has proposed DeFi-specific guidance explaining how those responsibilities should be applied to protocols and venues.
Why it matters
ADGM's FSRA is consulting on risk-management guidance for regulated firms engaging with DeFi, but the proposed expectations remain open to feedback until November 30.
The consultation remains open, so individual provisions and regulatory expectations may change before final publication.
ADGM's FSRA is consulting on risk-management guidance for regulated firms engaging with DeFi, but the proposed expectations remain open to feedback until November 30.
Decentralised finance does not remove responsibility from a regulated financial institution just because part of the activity happens through a protocol.
That is the direction of new proposed guidance from ADGM's Financial Services Regulatory Authority.
The FSRA is consulting on how Authorised Persons and Recognised Bodies should identify, assess, monitor and manage risks when engaging with DeFi protocols and venues.
The consultation remains open until November 30.
This is proposed guidance, not a final rule
The FSRA has published Consultation Paper No. 5 of 2026 and invited industry feedback.
That means the guidance can still change before finalisation.
Regulated firms should not treat every sentence in the consultation as a final regulatory requirement already in force.
The direction of travel is clear, but the final wording is not.
The regulator is focusing on the firm's decision to use DeFi
The proposed guidance concentrates on governance and control around a firm's engagement with decentralised protocols.
That includes due diligence before use, ongoing monitoring, financial-crime controls, incident escalation, recordkeeping and auditability.
The underlying idea is that decentralisation of infrastructure does not decentralise a regulated firm's accountability.
Due diligence becomes harder when there is no conventional counterparty
Traditional financial relationships often involve a company, contract and identifiable management structure.
A DeFi protocol may instead involve smart contracts, distributed governance, liquidity pools and multiple technology dependencies.
A regulated firm therefore has to understand what it is interacting with even when the system does not resemble a traditional service provider.
Client assets remain a regulatory problem even when code holds them
The consultation specifically includes client-asset safeguards.
That is important because assets may be exposed to smart-contract vulnerabilities, protocol failures, governance changes or technical dependencies outside a firm's direct control.
Using decentralised infrastructure does not make the consequences of losing client assets decentralised.
Auditability is becoming part of DeFi adoption
The FSRA also emphasises records and auditability.
That can be uncomfortable for technology designed around permissionless interaction and pseudonymous activity.
A regulated institution still has to be able to explain what it did, why it did it and how risks were managed.
The ability to reconstruct a decision becomes part of the compliance architecture.
This does not amount to an ADGM approval of every DeFi protocol
The guidance is about how regulated entities manage their own DeFi exposure.
It should not be interpreted as the FSRA certifying individual protocols or declaring all DeFi activity suitable for regulated firms.
The due diligence obligation exists precisely because protocol risk has to be assessed case by case.
What Arabian Current is watching
Watch changes following consultation, whether the FSRA publishes more detailed protocol-assessment expectations and how regulated firms document DeFi governance in practice.
The interesting question is not whether regulated finance will touch DeFi. It is how much accountability has to follow it there.
Regulated firms already had broader obligations around risk management, financial crime, governance and client assets.
The FSRA has proposed DeFi-specific guidance explaining how those responsibilities should be applied to protocols and venues.
The next state change will be final guidance after the consultation closes and industry feedback is assessed.
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ADGM says the proposed guidance covers governance, risk management, due diligence, monitoring, financial-crime controls, incident escalation, recordkeeping, auditability, competence and client-asset safeguards.
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01Core evidenceADGM FSRA Invites Industry Feedback on Proposed DeFi Risk Management Guidance
Abu Dhabi Global Market
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ADGM FSRA Invites Industry Feedback on Proposed DeFi Risk Management Guidance
Abu Dhabi Global Market
Confirms the consultation, scope of the proposed guidance and November 30 closing date.
The guidance is still under consultation and may change before finalisation.
The story keeps moving.
Track final guidance, consultation changes, protocol due-diligence expectations and how ADGM-regulated firms implement DeFi controls.
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