The Central Bank of the UAE (CBUAE) has given an initial license to AED Stablecoin under its Payment Token Service Regulation. This could make AED Stablecoin the first regulated dirham-pegged stablecoin in the UAE.
The approval helps address concerns regarding potential restrictions on crypto payments, alleviating fears that arose after the CBUAE’s new licensing framework.
CBUAE Approval Eases Crypto Payment Concerns
CBUAE’s initial approval under the new framework boosts AED Stablecoin’s chances of being the first licensed dirham-pegged stablecoin, easing worries about a possible ban on crypto payments.
This framework allows only licensed dirham-pegged tokens for payments. The approval supports regulated digital currencies, promoting the use of crypto in the UAE.
If fully approved, AED Stablecoin could be used as a key trading pair on exchanges, making it easier for everyday transactions and encouraging crypto use in the market.
Merchants may be able to accept AE Coins for goods and services, boosting the use of cryptocurrencies locally. However, the licensing framework has strict rules, disallowing algorithmic stablecoins or privacy tokens in favor of those fully backed by cash.
Issuers must back their stablecoins with cash in a UAE escrow account, ensuring reliability. They can also invest in CBUAE Monetary Bills for up to six months, maintaining some liquidity while ensuring stability.
AED Stablecoin Faces Competition from Tether
AED Stablecoin will compete with Tether, creator of the USDT stablecoin. Tether has partnered with local firms to create a dirham-pegged stablecoin, posing a challenge to AED Stablecoin.
The UAE’s supportive regulatory environment attracts crypto players like OKX, which recently launched a trading platform with a full operating license. The exchange M2 now allows residents to convert dirhams into Bitcoin and Ether, enhancing accessibility for crypto investment in the region.
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