SNEAK PEEK
- UAE central bank approves stablecoin licensing system to regulate AED-backed tokens for digital transactions.
- Regulations prohibit stablecoins from being linked to other currencies, ensuring stability in the monetary system.
- The move aligns with the UAE’s FIT program, which aims to promote digital innovation and position the country as a financial hub.
The Central Bank of the United Arab Emirates (CBUAE) has approved a new system for regulating and licensing stablecoins. This move marks a significant step in the country’s efforts to enhance its financial infrastructure and bolster its position in the digital economy.
The regulations, as outlined by Kokila Alagh, founder of KARM Legal Consultants, focus on issuing, licensing, and supervising payment tokens backed by the UAE dirham (AED). Notably, these tokens are prohibited from linking to other currencies, digital assets, or algorithms.
Restrictions and Requirements
Under the new regulations, merchants and service providers must transact solely in AED-backed tokens, excluding any other forms of virtual assets. This restriction underscores the central bank’s commitment to maintaining the stability and integrity of its monetary system.
Additionally, the regulations aim to provide clarity and certainty to digital payment ecosystem stakeholders. The UAE seeks to mitigate risks associated with unstable or unregulated digital currencies by enforcing stringent requirements.
Strategic Initiatives for Digital Innovation
The approval of the stablecoin licensing system aligns with the broader objectives of the UAE’s Financial Infrastructure Transformation (FIT) program. This initiative, spearheaded by the government, aims to promote digital transactions, foster innovation, and propel the country’s digital economy forward.
The UAE is positioning itself as a regional hub for financial and digital innovation by embracing emerging technologies and regulatory frameworks.
Central Bank Digital Currency (CBDC) Initiative
As part of the FIT program, the CBUAE announced plans to issue a central bank digital currency (CBDC) to address inefficiencies in cross-border payments and drive domestic payment innovation.
This strategic move underscores the UAE’s commitment to embracing digital transformation and staying ahead in the rapidly evolving financial technology landscape. By leveraging CBDCs, the UAE aims to enhance financial inclusion, streamline payment processes, and stimulate economic growth
