UAE Central Bank Grants Initial Approval for Dirham-Pegged Stablecoin

The UAE's Central Bank has taken a significant step by granting initial approval to AED Stablecoin, setting it up to potentially be the first officially regulated dirham-pegged stablecoin in the region.

This move comes amid recent licensing rules that limit crypto payments, except for approved dirham-backed tokens, alleviating concerns about possible restrictions.

If fully licensed, AED Stablecoin’s AE Coin could be used for crypto trading and merchant payments, paving the way for broader digital currency use in the UAE.

The central bank’s framework favors stablecoins backed by cash reserves, excluding algorithmic and privacy-focused tokens. Issuers must either hold all reserves in dirhams or split them between cash and short-term government securities.

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As the competition heats up, Tether has announced plans for its own dirham-backed stablecoin through local partnerships, while the UAE continues to attract global crypto firms.

Recent developments include OKX launching a local trading platform and M2 offering direct dirham-to-crypto conversions.

Alexander Zdravkov