In a groundbreaking move, AED Stablecoin LLC has secured in-principle approval from the Central Bank of the United Arab Emirates (UAE) to launch AE Coin, the country’s first dirham-backed stablecoin. This significant development aligns with the UAE’s forward-thinking vision and the Digital Government Strategy 2025.
AE Coin, regulated under the Payment Token Services Regulation (Circular No. 2/2024), will be fully backed by the UAE dirham, ensuring stability and reliability. This fiat-backed stablecoin combines the benefits of blockchain technology with the security of traditional currency, enabling seamless and secure payment solutions.
“The approval of AE Coin marks a significant milestone in the UAE’s journey towards a digital economy,” said Ramez Rafeek, General Manager of AED Stablecoin. “As the first stablecoin regulated by the Central Bank, AE Coin will revolutionize the digital currency space by providing financial freedom, unmatched stability, and enhanced security.”
Key features of AE Coin
According to the promoters, AED Stablecoin LLC, AE Coin offers the following features:
- Stability: Backed by the UAE dirham, mitigating volatility associated with cryptocurrencies.
- Security: Transparent reserves, regular audits, and state-of-the-art blockchain technology with multi-layer encryption.
- Compliance: Adheres to the highest standards of security and compliance.
- Interoperability: Integrates with decentralized finance platforms for lending, borrowing, and earning interest.
AE Coin’s introduction is expected to contribute significantly to the UAE’s rapidly expanding digital economy. With its credibility and trust assured by Central Bank regulation, AE Coin looks poised to transform the digital currency landscape in the region.
Read also: Stablecoins gain traction, threatening bitcoin’s dominance
Global Perspective: UAE’s Approach to Stablecoins
The UAE’s proactive approach to stablecoins contrasts with the following regions:
- Africa: Regulatory frameworks remain largely fragmented with South Africa classifying stablecoins as financial products and consequently subject to Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT) regulations, while Nigeria has recently started clamping down on foreign currency-pegged stablecoins, such as the USDT. In Nigeria for example, Wrapped CBDC Ltd was recently granted an in-principle approval to introduce cNGN (c₦) which is “intended to be used to facilitate crypto/digital assets transactions on recognised digital exchanges”, seeming to suggest that Nigeria is only receptive of stablecoins pegged to its local currency.
Read Also: Refuge from the Naira: Why Nigerians are Turning to Stablecoins in an Unstable Economy
- Asia: Countries like China and Japan have taken a cautious stance, focusing on central bank digital currencies (CBDCs) rather than stablecoins.
- Europe: The European Union’s Markets in Financial Instruments Directive (MiFID) provides a framework for stablecoins, but implementation varies across member states. Stablecoins are also regulated through Markets in Crypto-Assets (MiCA) Regulation and AML/CFT regulations.
- US: At the federal level, stablecoins are subject to oversight by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Office of the Comptroller of the Currency (OCC). While the SEC and CFTC regulate stablecoins as commodities, the OCC oversees stablecoins issued by banks. However, for improved clarity and certainty, Stablecoin Innovation and Protection Act (2022) and Responsible Financial Innovation Act (RFIA) have been proposed.
The UAE’s innovative approach demonstrates its commitment to fostering a favorable environment for digital innovation. By embracing stablecoins, the UAE aims to solidify its position as a global financial hub.
Closing Thoughts
The approval of AE Coin marks a significant milestone in the UAE’s digital economy journey. As the global landscape for stablecoins continues to evolve, the UAE’s proactive approach serves as a model for other regions. With its emphasis on stability, security, and compliance, AE Coin sets a new standard for stablecoins.
Will the UAE’s innovative approach inspire other countries to follow suit? Only time will tell, but one thing is certain—the future of digital currencies looks brighter than ever in the UAE.
Read also: Tether (USDT) Stablecoin: Use Cases and Pros and Cons You Should Know
