The UAE’s Central Bank has granted in-principle approval for a regulated dirham-pegged stablecoin, potentially making the UAE the first issuer of such a currency in the region. This development marks a significant step forward in the country’s cryptocurrency landscape, opening up new possibilities for digital transactions and economic growth.
The AED Stablecoin has received preliminary licensing under the Central Bank’s Payment Token Service Regulation framework. This framework addresses previous concerns about crypto payment restrictions by allowing licensed dirham-pegged tokens for payments. The regulations favor fully cash-backed assets and require issuers to maintain separate escrow accounts in UAE banks to back their stablecoins.
Potential Impact on Local Economy
If fully approved, the AED Stablecoin could serve as a local trading pair for cryptocurrencies on exchanges and decentralized platforms. This development could lead to more efficient and faster transactions for consumers, as merchants may begin accepting the stablecoin for everyday goods and services. The introduction of this regulated stablecoin could also enhance local trading activities and stimulate economic growth, positioning the UAE as a leader in the global cryptocurrency landscape.
Competition and Market Evolution
The AED Stablecoin will face competition from established players like Tether, which is launching its own dirham-pegged stablecoin in collaboration with local firms. This growing competition indicates a vibrant and evolving market, as the UAE continues to establish itself as a crypto-friendly environment. Major exchanges such as OKX and M2 have already launched services allowing residents to trade cryptocurrencies directly with dirhams, further expanding the infrastructure to support the adoption of digital currencies in everyday transactions.
