United Arab Emirates Approves First Dirham-Linked Stablecoin

AED Stablecoin Company announced that it has received the first approval from the UAE Central Bank to issue a dirham-backed stablecoin.

The United Arab Emirates (UAE) will soon see its first regulated stablecoin.

AED Stablecoin LLC has announced that it has received approval in principle from the UAE Central Bank to issue and establish its own dirham-linked stablecoin digital currency.

In a statement issued on Monday, the company described itself as a pioneer for obtaining permission to become the first authorized entity in the region to launch a stablecoin backed by reserves of the local currency. The authorization issued by the central bank falls under its framework for regulating payment token services, according to the statement.

Dubbed AE Coin, the new currency promises to revolutionize financial services by offering unprecedented stability, security, and efficiency, the statement continues.

“As a stable, regulated currency, it provides secure and seamless payment solutions while fostering the growth of the UAE’s digital economy,” the statement reads. Pegged to a fiat currency, AE Coin will be backed by “transparent reserves” of the dirham and subject to “regular audits,” the company assures.

The token will offer fast and low-cost transactions, with potential use for various purposes, including business-to-business payments, individual transactions, and investments. The stablecoin aims to foster economic growth and innovation in the UAE by providing a secure and efficient digital currency, the issuer said.

AED Stablecoin added that its token will offer additional features, such as integration with the decentralized finance ecosystem (DeFi), allowing users to make loans and credit transactions on decentralized platforms.

In addition, the ambitious roadmap includes integration with decentralized applications (dApps), listings on exchanges, and ongoing technological advancements. The company also stated its plans to form strategic partnerships and forge alliances with merchants to increase real-world use cases, making the coin more accessible for everyday transactions.

AE Coin is intended to support the UAE’s booming digital economy, enabling simpler and more secure payments that contribute to the country’s financial innovation.

The news comes at a time of global growth for stablecoins, a type of digital token built on blockchain technology that, unlike most cryptocurrencies, maintains a stable price, often with parity to a fiat currency such as the U.S. dollar.

Banks and other financial institutions in traditional finance have been actively exploring transactions with this class of tokens, as well as issuing their own stablecoins. Additionally, within the cryptocurrency industry, companies such as Ripple are working to advance this field.

Tether’s USDT dominates the stablecoin market, which is valued at more than $170 billion, with a current capitalization of $119 billion, according to CoinMarketCap data.

This development aligns with the UAE’s efforts to position itself as a global hub for cryptocurrency and Web3. Local regulators have been implementing regulatory policies that are more favorable to the new asset class. Dubai has introduced a sector-specific framework with a licensing system for digital currency exchanges.

Earlier this year, the UAE Central Bank’s board of directors approved a new system for overseeing and licensing stablecoins, raising concerns about potential restrictions on using cryptocurrencies other than authorized dirham-linked tokens as payment mechanisms.

A few days ago, UAE regulators removed VAT from cryptocurrency transactions.

Tether had already signaled its intention to launch a dirham-linked stablecoin when it announced a partnership in August with an Abu Dhabi-based company to advance these plans.