AED Stablecoin LLC Receives Authorization From the Central Bank of the UAE to Launch the Country’s Pioneering Dirham-backed Stablecoin

AED Stablecoin LLC, the issuer of AE Coin, has received authorization from the Central Bank of the UAE to launch the country's pioneering dirham-backed stablecoin.

The Central Bank of the United Arab Emirates (UAE) has authorized AED Stablecoin LLC to launch the country’s first dirham-backed stablecoin, according to a statement on Monday.

The stablecoin, called AE Coin, will be pegged to the UAE dirham and will be available for trading on licensed crypto exchanges. It will be backed by transparent reserves and will be subject to regular audits.

The launch of the dirham-backed stablecoin is part of the UAE’s broader efforts to promote digital asset innovation and develop a robust regulatory framework for the crypto sector.

In 2023, the UAE passed a federal decree on crypto assets, which established a licensing regime for crypto exchanges and service providers. The decree also mandated the creation of a national committee to oversee the crypto sector and set standards for digital asset offerings.

The Central Bank of the UAE has been actively engaged in exploring the potential benefits and risks of stablecoins. In 2022, the bank conducted a pilot project with EmTech to test the viability of a central bank digital currency (CBDC)-backed stablecoin.

Stablecoins are a type of cryptocurrency that is designed to maintain a stable value, typically by being pegged to a fiat currency, commodity, or other asset. They offer several advantages over traditional cryptocurrencies, such as reduced volatility and the ability to facilitate faster and cheaper transactions.

However, stablecoins have also faced some challenges, including concerns over transparency, liquidity, and the potential for market manipulation. The recent collapse of several major stablecoins, such as TerraUSD (UST), has highlighted the need for robust regulatory oversight and consumer protection measures in the stablecoin market.

Despite these challenges, stablecoins are expected to continue playing a significant role in the development of the digital asset ecosystem, offering new possibilities for payment, trade, and financial inclusion.