AED Stablecoin leads the race to produce the UAE’s first regulated dirham-pegged token as Tether awaits.
The Central Bank of the United Arab Emirates (CBUAE) has granted preliminary approval to AED Stablecoin under its Payment Token Service Regulation framework, according to a press release from the company.
This in-principle license positions AED Stablecoin as a leading contender to become the first issuer of a regulated dirham-pegged stablecoin in the UAE.
This approval helps alleviate concerns about potential restrictions on crypto payments, which emerged after the CBUAE introduced a new licensing framework.
The framework prohibits the use of crypto for payments unless it involves licensed tokens pegged to the dirham.
If fully licensed, AED Stablecoin’s AE Coin could be used as a local trading pair for cryptocurrencies on exchanges and decentralized platforms. It would also enable merchants to accept the coin for goods and services.
The central bank’s framework also bans algorithmic stablecoins and privacy tokens, favoring stablecoins backed entirely by cash.
Issuers are required to hold cash reserves in a separate escrow account fully denominated in dirhams at a UAE bank.
Alternatively, they can hold at least 50% of the reserve in cash, with the remaining portion invested in UAE government bonds and CBUAE Monetary Bills, with an average maturity of up to six months.
UAE’s Crypto-Friendly Environment
AED Stablecoin is expected to compete with Tether, the world’s largest stablecoin issuer by market capitalization.
Tether recently announced partnerships with Phoenix Group and Green Acorn Investments to launch its own dirham-pegged stablecoin.
Meanwhile, the UAE’s favorable crypto regulatory landscape continues to attract major players. OKX recently launched a trading platform for both retail and institutional investors after securing a full license, including derivatives trading for qualified institutional investors.
Additionally, crypto exchange M2 has introduced a new system allowing residents to convert dirhams directly into Bitcoin and Ether.
