UAE Central Bank Approves Stablecoin Issuer

The Central Bank of the United Arab Emirates (CBUAE) has given in-principle approval to AED Stablecoin under its Payment Token Service Regulation framework, as announced in the company’s press release.

With this preliminary license, AED Stablecoin is positioning itself as a leading candidate to issue the first regulated stablecoin in the UAE, pegged to the dirham.

This move comes as a relief to the crypto community, which had raised concerns about the CBUAE’s recent licensing framework that restricts crypto payments unless licensed dirham-pegged tokens are involved.

If granted full approval, AED Stablecoin’s AE Coin could function as a local trading pair for cryptocurrencies on both exchanges and decentralized platforms. Additionally, merchants could potentially accept it for goods and services, boosting crypto adoption in everyday transactions.

Under the central bank’s rules, algorithmic stablecoins and privacy tokens are excluded, with preference given to fully cash-backed assets.

Issuers must maintain their stablecoins by backing them with cash in a segregated escrow, entirely in dirhams within a UAE-based bank. Alternatively, they can hold at least 50% of the reserves in cash, with the remaining assets invested in UAE government bonds and CBUAE Monetary Bills, with an average maturity of up to six months.

However, AED Stablecoin isn’t alone in the market. Tether, the issuer behind the world’s largest stablecoin, USDT, has also entered the scene. Tether has partnered with local firms Phoenix Group and Green Acorn Investments to launch its own dirham-pegged stablecoin, setting up potential competition in the UAE.

Meanwhile, the UAE’s crypto-friendly regulations continue to attract significant players to the market. OKX has recently launched a platform for retail and institutional investors in the UAE after receiving a full license, including permission to offer derivatives trading to qualified institutional investors.

Additionally, crypto exchange M2 has rolled out a service allowing UAE residents to directly convert dirhams into Bitcoin and Ether, further expanding the local crypto ecosystem.

For more news, find me on Twitter Giannis Andreou and subscribe to My channels Youtube and Rumble

What is your opinion on this particular topic?  Leave us your comment below!  We are always interested in your opinion!