AED Stablecoin has secured in-principle approval from the Central Bank of the United Arab Emirates (CBUAE) under its Payment Token Service Regulation framework, positioning it as the frontrunner to launch the UAE’s first regulated dirham-pegged stablecoin.
This preliminary license alleviates concerns over potential restrictions on crypto payments that arose following the CBUAE’s recent licensing framework, which limits crypto use for payments to licensed dirham-pegged tokens.
If fully approved, AED Stablecoin’s AE Coin could serve as a local trading pair on exchanges and decentralized platforms, enabling merchants to accept it for goods and services. The CBUAE’s framework also prohibits algorithmic stablecoins and privacy tokens, emphasizing the need for fully cash-backed assets.
Issuers are required to back their stablecoins with cash held in a separate escrow account within a UAE bank. Alternatively, they may maintain at least 50% of reserve assets as cash, while the remaining portion can be invested in UAE government bonds and CBUAE Monetary Bills with a maximum duration of six months.
Competition from Tether
AED Stablecoin will likely face competition from Tether, the issuer of the world’s largest stablecoin, USDT, which is nearing a market capitalization of $120 billion. Tether has announced partnerships with local firms Phoenix Group and Green Acorn Investments to introduce its own dirham-pegged stablecoin.
The UAE’s crypto-friendly regulatory environment continues to attract major players, with companies like OKX launching retail and institutional trading platforms after obtaining full licenses, including derivatives trading for qualified institutional investors. Additionally, crypto exchange M2 has introduced a system that allows residents to convert dirhams directly into Bitcoin and Ether.
