Mintlayer Expert Interview Series #1

An interview with Ícaro Avelar

Welcome to the first installment of the Mintlayer Expert Interview Series. In this new series, we speak with influential leaders in the industry who shape where finance, compliance and technology are headed. Our aim with this series is to share with our community real unfiltered perspectives and deeper longer form insights straight from those who have the most expertise.

We're kicking off the series with a stand out guest Ícaro Avelar, a highly experienced legal counsel based in Abu Dhabi specializing in digital assets regulation, web3, and blockchain under UAE regulatory frameworks.

Now, let's hear directly from Ícaro.

Big Picture:

Why might regulatory clarity matter more than technical breakthroughs for blockchain’s next phase?

Being in this space since 2017, it’s clear to see how big technical complexities are being very well handled nowadays. There are challenges, however, a relevant amount of technical hurdles we faced some time ago are well addressed now and we have good technical knowledge being produced by experienced developers. Some critical technical weaknesses were exploited in the past and the industry learned how to handle them.

Now, we are in a moment where institutional players are beginning to access the industry after realizing how blockchain as an infrastructure is capable of providing solutions not available under centralized structures. However, institutional players need regulatory clarity to allocate assets because they are mainly dealing with third parties assets.

This is something very new and we didn’t have enough time to stress test regulatory environments to achieve a global standard. Basically, while we are having this conversation, we have three big different regulatory standards in the world, The Genius Act (US), MiCA (EU), and VARA/ADGM/DIFC (UAE). THey are very different from each other and even answering simple questions like: “I want to incorporate a regulated on/off-ramp business, which license should I apply for?” is not easy to answer as it is the answers related to incorporating a real estate fund, as an example.

We literally live in a regulatory arbitrage situation, where none of the available standards fits 100% of all the crypto business models. There are frameworks that are more suitable on a high-level, but when bringing business perspective, client profile, shareholders profiles etc.. to the equation, then we face the real complexities of understanding regulatory frameworks.

What misconception about “regulation vs innovation” do you encounter most often?

That regulation kills innovation. This is simply not true. Regulation kills irresponsible players. Yes, these players bring some innovation, but usually, when they are not scammers, they just don’t have the technical and human resources capabilities to handle a business so impactful as they are developing. 

We had a good number of famous examples of web3 businesses that went completely bankrupt by the lack of risk management policies, business continuity policies, IT security capabilities that under a regulated business are better mitigated and heavily overseen.

Hundreds of millions of dollars were wiped-out from the market on investments made in very enthusiastic and honest teams that unfortunately were not prepared to handle the business they were creating and went completely bankrupt.

By the other hand, under regulated companies, we saw token prices dropping 90% due to alleged market makers inefficiencies like Mantra, or centralized regulated exchanges being socially hacked and all the client’s funds being safe as happened with OKX and both entities are regulated by VARA in Dubai.

UAE context and policy signals:

How do you interpret the UAE’s latest financial sector strategy and virtual assets posture in terms of practical opportunities for builders?

Nowadays, in my opinion, the UAE is the best regulatory framework available. In the traditional financial market, there is an investment strategy called “follow the whales” (you basically follow the investments being made by the big investors). I believe we can apply the same for the regulatory arbitrage: Tether, the biggest stable coin issuer company in the world decided not to adhere to MICA standards and ceased its business in Europe, while discussing its licensing in the UAE.

One of the big companies in web3, Tether, the issuer of USDT with huge financial availability, human resources availability, advisors availability, legal counselors availability choose one jurisdiction instead of another. In my opinion, basically, they’ve concluded the heavy work for all web3 entrepreneurs on regulatory framework arbitrage.

From a founder’s lens, what does the UAE do differently in translating policy into executable market rules?

The regulators are open to understand the business model and to work in waivers that could be traduced in less business changes as it would be required if following the standard requirements in the regulations. There are some non-negotiable standards, however the openness to discuss and try to find a solution exists.

On top of that, we can add the amazing quality of life the UAE is offering for its residents, in comparison to other 1st world countries.

What type of projects become possible in the UAE that are hard to run elsewhere?

Stablecoin business, mainly in ADGM that allows interest payments to the holders, while it is not allowed under MiCA. Utility token issuances, given the ADGM DLT Foundation framework and security token + its placement and secondary market under the same entity, allowed by VARA VA1 Issuance License combined with the Broker Dealer License.

In my opinion these are huge competitive advantages being provided by the regulatory frameworks in the UAE, non-available elsewhere and the entrepreneurs that are prepared to benefit from it will see its business thrive.

Real World Assets:

Why is regulatory clarity especially critical for real world assets compared with pure crypto products?

Because at the end of the day, the liability of the issuer needs to be very clear. If the regulatory framework does not provide risk mitigation to the investor, there is no reason to invest at all. The profile of RWA investors is mainly investors that are used to the traditional markets. Even if this investor doesn't know exactly how the safeguards work, he grows in this environment, so it’s natural for him.

On the other hand, we need to provide to the asset owners the safeguard of what happens in a default situation.

There are even specific classes of assets like real estate that by its nature, tokenizing and splitting into fractional shares it is extremely complex when we go down to the operational aspect of defining who is the landlord, how is liable for the maintenance, who has the right to claim the ownership etc…

Tokenized equity:

What problem does tokenized equity solve that traditional fundraising does not?

We may say that the crowdfunding regulations can be seen as a first regulatory attempt to solve fundraising via retail markets. However, the numbers are not favourable to the investors, nor to the entrepreneurs.

I see that tokenized equity can be seen as an upgrade to this solution, enabling global scalability, allowing me as a resident in the UAE to buy equity from a company developing a solution in Brazil, or in New Zealand, or in Zimbabwe and allowing entrepreneurs to access investors all around the world.

It’s also a huge facilitator of cap table management and dividends payment, in the sens that the company can manage everything and process all the payments via smart contracts using stablecoins, all traceable and auditable.

How should cap tables, shareholder rights, and disclosures be represented on-chain to satisfy both regulators and investors?

Icaro: Compliance is the key here: or we need to have a blockchain where the compliance is built at the protocol level (and there are a wide range of ideas to do it), or the entrepreneurs must create its compliance solutions to make sure that their businesses are not being used to launder money or to other illicit activities and end being wake up in the morning with the police at their doorstep, instead of a notification of their tokens hitting ATH.

Risk, governance, and auditability:

What are the top three risks regulators worry about with tokenized products, and how can projects address them proactively?

Money laundering and financial terrorism are the main ones, followed by client money preservation. A robust compliance policy with tangible actions and liable persons encompassing KYC, KYB, KYT and KYV (for the appropriated cases) are utterly relevant followed by a team that holds the capability, experience and knowledge to run the business.

What does good governance look like for on-chain funds and tokenized equity issuers, including reporting cadence and assurance?

This is complex. There are no standards in the industry since this is something new on the market. I am of the opinion that a governance framework (people, tools and report) that allows you to answer securely in the few clicks as possible the question “who is the owner of this wallet that we sent XXXX value as dividend distribution last month?” Is a good starting point.

Roadmap and predictions:

Over the next 12 months, where do you expect the clearest regulatory wins that unlock new categories of products?

Real estate and shares tokenization. I believe if we achieve a regulatory framework that allows these assets to be born on-chain, we will achieve a huge advancement.

If you could change one policy to accelerate compliant blockchain adoption globally, what would it be and why?

I believe that we should have a flexibilize regulatory framework for on-chain decentralized custody. What we see nowadays is if web3 businesses are also custodian of their client’s crypto, they face higher scrutiny and capital requirements. What they can do to reduce it, is using licensed custodians. However, if they were authorized to use decentralized custody, coding the smart contract complying with the regulations regarding asset access would be a win-win situation.

Speed Round: 

Centralized exchanges are extremely inefficient to handle stolen assets being traded in their platforms.

One overhyped tech fix that regulation will decide instead of code?

I don’t see how it would be decided by the regulation, but regulation will have a relevant role in its adoption are the zero knowledge proof solutions.

One underappreciated benefit of building in the UAE today?

The access to brilliant minds focusing on developing business. There are some places in the world where it is possible, but here in the UAE it is very underappreciated.

Closing thoughts:

Regulatory compliance has been touted as a brake on innovation, but brakes exist to protect the end user, especially when teams lack the experience to protect customers’ assets. Strong organizations need to plan for regulation and compliance from day one and build accordingly based on the regulatory requirements. 

Thanks for joining us for our first Expert Interview. Get ready for more interviews to come. 

About the guest: Ícaro Avelar

Ícaro Avelar is a seasoned legal advisor specializing in web3 and blockchain regulations. Based in Abu Dhabi, he advises companies and founders navigating the rapidly evolving landscape of digital assets, DLT foundations, and token launches. With extensive experience under UAE regulatory frameworks Ícaro provides strategic legal guidance for structuring tokenized projects.

He is recognized for combining rigorous legal insight with a pragmatic understanding of technology, helping startups, funds, and entrepreneurs build compliant, future-ready businesses at the intersection of law and innovation.

Where to find Icaro:
LinkedIn: https://www.linkedin.com/in/icaroavelar/