AED Stablecoin Gets Preliminary Approval from UAE Apex Bank
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The Central Bank of the United Arab Emirates (CBUAE) has given AED Stablecoin in-principle permission under its Payment Token Service Regulation framework, according to a firm press statement.
AED Stablecoin’s preliminary license approval puts it in the lead in the race to be the first issuer of a regulated dirham-pegged stablecoin in the UAE.
This action alleviates concerns about potential limits on crypto payments raised by the CBUAE’s recent release of its licensing framework, which restricts cryptocurrency payments unless they contain licensed dirham-pegged coins.
If completely approved, AED Stablecoin might be used as a local trading pair for cryptocurrencies on exchanges and decentralized platforms, with merchants accepting it for products and services.
CBUAE’s Stablecoin Regulatory Framework
It is important to note that the central bank’s licensing system prohibits algorithmic stablecoins and privacy tokens, instead favoring fully cash-backed assets. This suggests issuers must back their stablecoins with cash in a separate escrow account fully denominated in dirhams within a UAE bank.
Alternatively, issuers may maintain at least 50% of reserve assets in cash. However, the remainder must be invested in UAE government bonds and CBUAE monetary bills with maturities of up to six months.
Creating a Crypto-friendly System
With the preliminary approval, AED Stablecoin is expected to compete with the world’s largest stablecoin by market capitalization, Tether. However, Tether (USDT) has announced its partnership with local enterprises Phoenix Group and Green Acorn Investments to launch a dirham-pegged stablecoin.
Meanwhile, the UAE’s crypto-friendly regulatory system has attracted significant investors like OKX and crypto exchange M2 into its system. This new development places the UAE at the forefront of enacting crypto regulatory measures.
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