AED Stablecoin Emerges as a Leader Among Regulated Stablecoins
The Central Bank of the United Arab Emirates (#CBUAE ) has granted preliminary approval for the issuance of AED Stablecoin under its regulatory framework for payment tokens, according to a company press release. This approval positions AED #stablecoin as a key player in the race to become the first regulated stablecoin issuer tied to the Emirati dirham (AED) in the UAE.
Easing Concerns Over Crypto Payment Restrictions
This development alleviates concerns that arose after the CBUAE introduced its licensing framework, which restricts the use of cryptocurrencies for payments unless tied to licensed tokens linked to the dirham. If fully approved, AED Stablecoin's AE Coin could serve as a major trading pair for cryptocurrencies on exchanges and decentralized platforms, while also allowing merchants to accept it as payment for goods and services.
Requirements for Stablecoin Issuers
The new licensing framework prohibits the use of algorithmic stablecoins and privacy tokens, giving preference to fully cash-backed stablecoins. Issuers are required to back their stablecoins with cash stored in a UAE bank, with at least 50% of reserves held in cash. The remaining portion can be invested in UAE government bonds and CBUAE monetary bills with an average maturity of up to six months.
Competition from Tether and Other Crypto Activities in the UAE
AED Stablecoin will face competition from Tether, which recently announced a partnership with Phoenix Group and Green Acorn Investments to launch its own dirham-backed stablecoin. At the same time, the UAE’s crypto-friendly regulatory environment is attracting major players.
For instance, OKX has launched a retail and institutional trading platform in the UAE after obtaining a full license, allowing it to offer derivative trading for institutional investors. Additionally, the M2 crypto exchange has introduced a new system enabling UAE residents to directly convert dirhams into Bitcoin (#BTC☀ ) and Ether.
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