UAE Central Bank Approves New Stablecoin System; Plans Central Bank Digital Currency
Summary:
The Central Bank of the United Arab Emirates' (CBUAE) board has approved the introduction of a new system to regulate and license stablecoins. The decision, part of the government's Financial Infrastructure Transformation program, was reached at a meeting headed by UAE VP and CBUAE chairman, Sheikh Mansour bin Zayed Al Nahyan. The meeting also communicated the CBUAE's plan to issue a Central Bank Digital Currency (CBDC) to improve cross-border payments and stimulate domestic payment innovation. In parallel, the Dubai Financial Services Authority updated its regulations for recognizing stablecoins, allowing for investment in non-recognized crypto tokens as long as they do not exceed 10% of the total fund asset value.
The Central Bank of the United Arab Emirates' (CBUAE) managing council has sanctioned the implementation of a new system for administering and authorizing stablecoins. The decision was made during a gathering convened in Abu Dhabi as part of the government's economical infrastructure realignment (FIT) scheme. The objective of this scheme is to increase digital transactions, stimulate the UAE's digital economy, and promote innovative practices. The discussion was presided over by Sheikh Mansour bin Zayed Al Nahyan, the UAE's vice president and chairman of the CBUAE. Other attendees comprised CBUAE's deputy chairmen Abdulrahman Saleh Al Saleh, Jassem Mohammad Al Zaabi, and Central Bank governor Khaled Mohamed Balama, along with the bank's managing council.
The governing body greenlighted a new law for managing and issuing stablecoins. Kokila Alagh, founder of KARM Legal Consultants, in a conversation with the native newsletter Unlock Blockchain, revealed that the legislation elucidates the licensing, supervising and issuing aspects of payment tokens supported by UAE dirhams (AED). She also stated that these payment tokens must possess an underpinning of UAE dirhams and not be associated with other digital assets, currencies or algorithms. Possibility of acceptance of these AED-backed tokens by merchants and service providers restricts to the exclusion of any other digital entities.
Although the finer details of the gathering remain undisclosed, the prominent subjects involved significant projects of the FIT initiative. On Feb. 13, the CBUAE broadcasted its intention to introduce a central bank digital currency (CBDC) as part of the FIT scheme. The introduction of a CBDC is aimed at resolving inefficiencies in international payments and encouraging domestic payment development. The CBUAE anticipates that CBDC issuance will boost the UAE's standing as a hub for financial and digital transactions.
Additionally, a financial oversight body in UAE recently revised its rules pertaining to stablecoin recognition. The changes, implemented by the Dubai Financial Services Authority (DFSA) on June 3, introduced extra standards for recognizing these digital assets. Presently, the regulator recognizes only a handful of crypto tokens, including Bitcoin, Ether, Litecoin, XRP, and Toncoin. It means that resources under the DIFC are restricted from making investments in crypto tokens other than the ones listed previously. However, the changes in regulations have now permitted investments in non-recognized crypto tokens as long as they do not exceed 10% of the overall asset value of the funds.
Published At
6/5/2024 3:12:24 PM
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