UAE to Create its Own Stablecoin Linked to the Dirham

While Tether remains on the sidelines, AED Stablecoin LLD is positioning itself as a leading contender to issue the first regulated stablecoin pegged to the dirham in the United Arab Emirates.

According to a recent announcement, the Central Bank of the UAE (CBUAE) has granted the issuer preliminary approval under its framework for the regulation of payment coin services.

This development helps ease concerns about potential restrictions on crypto payments following the CBUAE’s introduction of its licensing framework, which prohibits crypto payments unless they involve licensed tokens linked to the dirham.

If fully approved, “AE Coin” will serve as a local trading pair for cryptocurrencies across exchanges and decentralized platforms, while allowing merchants to accept it for goods and services.

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The central bank’s framework also excludes algorithmic stablecoins and privacy tokens, prioritizing fully-backed stablecoins. Issuers are required to fully back their tokens with cash in dirham-denominated escrow accounts at a UAE bank.

Alternatively, issuers of stablecoins may hold at least 50% of the reserve assets as cash, with the remainder invested in UAE government bonds or CBUAE bonds maturing within six months.

Alexander Zdravkov