UAE Approves Stablecoin Licensing System

The Central Bank of the United Arab Emirates' (CBUAE) board of directors recently approved a new framework for regulating and licensing stablecoins.

During a session in Abu Dhabi, the board engaged in discussions about initiatives within the government's Financial Infrastructure Transformation (FIT) program.

This program is designed to enhance digital transactions, propel the nation’s digital economy, and encourage innovation.

Sheikh Mansour bin Zayed Al Nahyan, Vice President of the UAE and Chairman of the CBUAE, presided over the meeting.

Notable attendees included Deputy Chairmen Abdulrahman Saleh Al Saleh and Jassem Mohammad Al Zaabi, Governor Khaled Mohamed Balama, and other members of the central bank’s board.

The board consented to a new rule for the regulation and licensing of stablecoins.

Kokila Alagh, founder of KARM Legal Consultants, shared with Unlock Blockchain, a local media outlet, that the new regulations would clarify the process for issuing, licensing, and supervising dirham-backed payment tokens.

Additionally, Alagh stated that these payment tokens have to be supported by UAE dirhams and must not be tied to other currencies, digital assets, or algorithms.

She noted that only dirham-backed tokens are acceptable for transactions by merchants and service providers.

Details of the meeting remain undisclosed, but the discussions reportedly focused on major initiatives within the FIT program.

On February 13, the CBUAE declared its plans to introduce a central bank digital currency (CBDC) as part of this initiative.

The introduction of a CBDC is targeted at remedying inefficiencies in cross-border payments and fostering innovation in domestic payments.

The CBUAE believes that launching a CBDC will position the UAE as a leading center for finance and digital payments.

In related news, another financial authority in the UAE updated its guidelines for stablecoin recognition.

On June 3, the Dubai Financial Services Authority (DFSA) set new standards for stablecoin recognition.

Currently, the DFSA only acknowledges a select few crypto tokens including Bitcoin, Ether, Litecoin, XRP, and Toncoin, limiting DIFC funds to investments in these assets.

With the new token policy, funds are now permitted to invest in unrecognized crypto tokens, provided such investments do not surpass 10% of the fund's total asset value.

Sources:

https://cointelegraph.com/news/uae-stablecoin-licensing-system

https://wam.ae/en/article/b3h9y1x-chaired-mansour-bin-zayed-cbuae-board-reviews

https://www.unlock-bc.com/124081/uae-central-bank-approves-new-system-for-licensing-stablecoins/