The Central Bank of the United Arab Emirates (CBUAE) has given the green light to a new system aimed at overseeing and licensing stablecoins.
During a meeting held in Abu Dhabi, the board of directors, chaired by UAE Vice President and CBUAE Chairman Sheikh Mansour bin Zayed Al Nahyan, discussed initiatives under the government’s financial infrastructure transformation (FIT) program. This initiative is geared towards bolstering digital transactions, advancing the country’s digital economy, and fostering innovation.
The approval of a regulation for overseeing and licensing stablecoins was a key outcome of the meeting. According to Kokila Alagh, founder of KARM Legal Consultants, these regulations provide clarity on the issuance, licensing, and supervision of payment tokens backed by the UAE dirham (AED).
Alagh highlighted that under these regulations, payment tokens must be exclusively backed by AED and cannot be tied to other currencies, digital assets, or algorithms. Moreover, merchants and service providers are only permitted to accept AED-backed tokens, excluding all other virtual assets.
The discussion also touched upon various projects under the FIT program, although specific details were not disclosed. One significant aspect of the FIT initiative, announced on February 13, is the issuance of a central bank digital currency (CBDC). This move aims to address inefficiencies in cross-border payments and promote innovation in domestic payments, positioning the UAE as a competitive financial and digital payments hub.
In addition to stablecoin licensing, another regulatory update was recently made by one of UAE’s financial regulators. On June 3, the Dubai Financial Services Authority (DFSA) introduced additional criteria for recognizing stablecoins. This revision allows funds under the Dubai International Financial Centre (DIFC) to invest in unrecognized crypto tokens, provided that such investments do not exceed 10% of the funds’ gross asset value.
Summary Review: The approval of a stablecoin licensing framework by the UAE Central Bank marks a significant step towards enhancing the regulatory clarity and oversight of digital assets in the region. This move aligns with the government’s broader FIT program, aimed at modernizing financial infrastructure and fostering innovation in digital payments. With the introduction of this framework, coupled with the ongoing efforts to issue a central bank digital currency (CBDC), the UAE is positioning itself as a forward-thinking hub for fintech and digital finance. Additionally, the recent update by the Dubai Financial Services Authority (DFSA) regarding stablecoin recognition further reflects the commitment of UAE’s financial regulators to adapt to the evolving landscape of cryptocurrencies and blockchain technology. Overall, these regulatory developments pave the way for greater participation and investment in the digital asset space while ensuring investor protection and financial stability.
Disclaimer: Remember that nothing in this article and everything under the responsibility of Web30 News should be interpreted as financial advice. The information provided is for entertainment and educational purposes only. Investing in cryptocurrency involves inherent risks and potential investors should be aware that capital is at risk and returns are never guaranteed. It is imperative that you conduct thorough research and consult with a qualified financial advisor before making any investment decision.
