The Central Bank of the United Arab Emirates has given the green light to AED Stablecoin.
This approval puts AED Stablecoin in the lead to launch the UAE’s first regulated dirham-pegged token, leaving Tether anxiously waiting in the background.
A big step toward regulated crypto payments
This initial approval means they are now front-runners in becoming the first issuer of a regulated dirham-pegged stablecoin in the UAE.
This is great news for anyone worried about potential restrictions on crypto payments, especially after the CBUAE unveiled its licensing framework not so long ago.
That framework had some folks sweating bullets since it prohibits using cryptocurrencies for payments unless they are licensed dirham-pegged tokens.
The first dirham-pegged token
If everything goes smoothly and AED Stablecoin gets full approval, their AE Coin could become a local trading option for cryptocurrencies on exchanges and decentralized platforms.
Merchants would also be able to accept it for goods and services, which sounds pretty handy.
The central bank’s rules also make it clear that algorithmic stablecoins and privacy tokens aren’t welcome at this party, preferring stablecoins that are fully backed by cash.
To keep things above board, issuers must back their stablecoins with cash held in a separate escrow account at a UAE bank.
They can also choose to hold at least half of their reserves as cash, while the rest can be invested in UAE government bonds and CBUAE Monetary Bills with an average duration of six months. So, no funny business here.
Competitive environment for stablecoins
While AED Stablecoin is making waves, it won’t have an easy ride.
Tether, known for being the biggest player in the stablecoin game with USDT, has also set its sights on launching a dirham-pegged stablecoin, and they’re already announced partnerships with local companies Phoenix Group and Green Acorn Investments to help make this happen.
The UAE is rolling out the red carpet for crypto businesses, and it’s attracting big names. For example, OKX has just launched a trading platform in the UAE after securing a full license that allows derivatives trading for qualified institutional investors.
Another crypto exchange, M2 also introduced a new system that lets residents convert dirhams directly into Bitcoin and Ether.
