According to Cointelegraph: The Central Bank of the United Arab Emirates (CBUAE) has granted in-principle approval to AED Stablecoin under its Payment Token Service Regulation framework, positioning the project as the frontrunner to launch the UAE’s first regulated dirham-pegged stablecoin.

• AED Stablecoin's preliminary approval provides clarity on crypto payment regulations after concerns emerged regarding restrictions in the CBUAE’s latest licensing framework. The framework only permits licensed dirham-pegged tokens for payments, while prohibiting algorithmic stablecoins and privacy tokens.

• If fully approved, AE Coin—the stablecoin issued by AED Stablecoin—could act as a local trading pair for cryptocurrencies on both exchanges and decentralized platforms, while also enabling merchants to accept it for goods and services.

Stablecoin Issuance Requirements:

The CBUAE’s framework mandates that issuers must:

1. Fully back stablecoins with cash held in escrow in UAE banks, or

2. Hold at least 50% of reserve assets in cash, with the remainder invested in UAE government bonds or CBUAE Monetary Bills with a maturity of up to six months.

Competition on the Horizon

While AED Stablecoin is currently leading the race to launch the UAE’s first regulated dirham-pegged token, it faces competition from Tether, the issuer of the world’s largest stablecoin, USDT, with a $120 billion market cap. Tether has partnered with Phoenix Group and Green Acorn Investments to introduce its own dirham-backed stablecoin, reflecting the growing interest in stablecoins within the UAE.

UAE’s Crypto-Friendly Environment

The UAE’s crypto-friendly regulatory environment has been attracting key players in the global blockchain space, underscoring the country’s ambition to become a hub for digital assets and payment innovations. With the green light from the CBUAE, AED Stablecoin could become a pioneer in this evolving landscape, offering a regulated bridge between traditional finance and the crypto economy.