Race Begins for UAE’s First Regulated Dirham-Pegged Stablecoin
The Central Bank of the United Arab Emirates (CBUAE) just granted in-principle approval to AED Stablecoin under its shiny new Payment Token Service Regulation framework. The press release hit the streets today, signaling that AED Stablecoin is now a front-runner in the quest to birth the first regulated, dirham-pegged stablecoin within the UAE.
Crypto Payments Back in the Picture?
This nod from the CBUAE is a serious signal after the bank’s recent regulatory update had some folks sweating over whether crypto payments were about to get the axe. The bank’s updated licensing framework made it clear: no crypto payments unless they’re backed by licensed dirham-tied tokens. AED Stablecoin fits that bill, and if it secures the full regulatory thumbs-up, their AE Coin could flip the script. It could become the local trading pair for cryptocurrencies on both exchanges and decentralized platforms, so merchants could finally start accepting crypto for goods and services.
Fully Backed or Busted: The Stablecoin Standards
But AED Stablecoin’s gonna have to play by the rules. The CBUAE’s new framework slams the door on algorithmic stablecoins and privacy tokens, favoring the slow and steady—fully cash-backed stablecoins. Issuers will need to park their dirhams in a separate escrow account at a UAE bank. Alternatively, they can hold 50% of reserve assets in cash, with the other half invested in UAE government bonds and CBUAE Monetary Bills. And they can’t get too cozy with those bonds—average duration is capped at six months.
Tether Enters the Chat: Competition Ahead
But AED Stablecoin’s ride isn’t gonna be a solo journey. Tether, the undisputed titan of stablecoins, has already started making moves. The company partnered with Phoenix Group and Green Acorn Investments to cook up its own dirham-pegged token. So, competition’s heating up quick. While AED Stablecoin might have the first approval in its pocket, Tether’s got its eye on the prize too.
Meanwhile, the UAE’s crypto-friendly vibes are still pulling in big names. OKX just launched a full retail and institutional trading platform, throwing derivatives trading into the mix for institutional investors. And crypto exchange M2’s letting UAE residents convert their dirhams straight into Bitcoin or Ether. The dirham-crypto bridge is getting stronger, and AED Stablecoin is staking its claim in the middle of it all.
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