The board of directors of the Central Bank of the United Arab Emirates (CBUAE) approved the issuance of a new system to oversee and license stablecoins. 

In a meeting in Abu Dhabi, the board reportedly discussed projects under the government’s financial infrastructure transformation (FIT) program. The initiative aims to boost digital transactions, advance the country’s digital economy and foster innovation. 

The meeting was chaired by UAE vice president and CBUAE chairman Sheikh Mansour bin Zayed Al Nahyan. Attendees included deputy chairmen Abdulrahman Saleh Al Saleh and Jassem Mohammad Al Zaabi, CBUAE Governor Khaled Mohamed Balama and the central bank’s board members.

UAE approves new system for stablecoin licensing

During the meeting, the board approved issuing a regulation for overseeing and licensing stablecoins. In an interview with local media Unlock Blockchain, KARM Legal Consultants founder Kokila Alagh explained that the regulations clarify the issuance, licensing and supervision of dirham-backed payment tokens.

In addition, the UAE lawyer said that payment tokens must be backed by UAE dirhams and cannot be linked to other currencies, digital assets or algorithms. She added that merchants and service providers can only accept dirham-backed tokens and no other virtual assets.

UAE’s financial transformation program

While the specifics of the meeting have not been revealed, the topics reportedly included key projects under the FIT program. On Feb. 13, the CBUAE announced it would issue a central bank digital currency (CBDC) under the FIT initiative.

The issuance of a CBDC aims to address cross-border payment inefficiencies and drive domestic payment innovation. According to the CBUAE, issuing a CBDC would help the UAE be competitive as a financial and digital payments hub.

Dubai regulator updates crypto token regime

Apart from stablecoin licensing, one of UAE’s financial regulators also recently updated its rules for stablecoin recognition. On June 3, the Dubai Financial Services Authority (DFSA) introduced additional criteria for recognizing stablecoins.

At the moment, the regulator only recognizes a limited number of crypto tokens, including Bitcoin, Ether, Litecoin, XRP and Toncoin (TON). This means funds under the DIFC cannot invest in other tokens apart from the five recognized crypto assets.

However, with the revised token regime, the regulator allowed investing in unrecognized crypto tokens as long as the investment would not exceed 10% of the funds’ gross asset value.

Source : Cointelegraph / Jun 5, 2024