AED Stablecoin is the leading candidate to introduce the United Arab Emirates’ first regulated dirham-pegged token, as Tether waits in the wings.
AED Stablecoin has been provided with in-principle sanction by the Central Bank of the United Arab Emirates (CBUAE) under its Payment Token Service Regulation framework, according to a press release from the company.
AED Stablecoin is now a leading contender in the competition to become the first issuer of a regulated dirham-pegged stablecoin in the UAE, following the preliminary license approval.
The recent publication of the CBUAE’s licensing framework, which prohibits the use of crypto for payments unless they involve licensed dirham-pegged tokens, has led to concerns regarding prospective restrictions on crypto payments. This development has alleviated these concerns.
If completely approved, AED Stablecoin’s AE Coin could function as a local trading companion for cryptocurrencies in exchanges and decentralized platforms, while also enabling merchants to accept it as payment for products and services.
The licensing framework of the central bank also prohibits algorithmic stablecoins and privacy tokens, in favor of completely cash-backed assets.
The stablecoins issued by the issuers must be backed by currency in a distinct escrow account that is entirely denominated in dirhams and located within a UAE bank.
Alternatively, they may maintain a minimum of 50% of their reserve assets in cash, while the remaining fraction is invested in UAE government bonds and CBUAE Monetary Bills with an average duration of up to six months.
It is anticipated that Tether, the issuer of the world’s largest stablecoin by market capitalization, USDT, will compete with AED Stablecoin.
Tether partnered with Phoenix Group and Green Acorn Investments to establish its own dirham-pegged stablecoin, as recently announced.
In contrast, the UAE’s regulatory framework has been drawing in significant participants due to its crypto-friendly nature.
For example, OKX recently established a retail and institutional trading platform in the UAE after obtaining a full license that permits derivatives trading for qualified institutional investors.
Furthermore, M2, a cryptocurrency exchange, has created a new system that enables residents to directly convert dirhams into Bitcoin.
Also Read: Telegram will establish an office in Kazakhstan to enhance regulatory compliance
Wallets