UAE Unveils New Regulatory Framework for Stablecoins, Aims to Issue CBDC

Under the direction of UAE Vice President and CBUAE Chairman Sheikh Mansour bin Zayed Al Nahaney, the central bank's board of directors deliberated

ABU DHABI, 2nd March, 2023 (WAM) -- The board of directors of the Central Bank of the UAE (CBUAE) has discussed several initiatives within the Financial Infrastructure Transformation (FIT) programme during a recent conference in the capital.

The initiatives aim to enhance the country's digital economy and usher in a new era for online transactions.

The initiatives include a new regulatory framework for stablecoins, which will govern their issuance, licensing, and supervision. Kokila Alagh, founder of KARM Legal Consultants, said the framework specifies AED-backed payment tokens, ensuring they are supported only by the UAE dirham.

"These tokens will be the only ones accepted by stores and service providers in the UAE, excluding other virtual assets. This move will streamline the digital payment landscape and align with the broader objectives of the Financial Infrastructure Transformation (FIT) programme," Alagh added, noting that the tokens will not be pegged to other currencies, digital assets, or algorithms to ensure a stable and secure payment environment.

While the details of the latest meeting were not disclosed, the discussions are expected to cover major initiatives within the FIT programme.

The CBUAE had earlier announced its plans to issue central bank digital currencies (CBDCs). The launch of a CBDC aims to address inefficiencies in cross-border payments and drive local payment innovation, positioning the UAE as a competitive hub for digital and financial payments.

Meanwhile, the Dubai Financial Services Authority (DFSA) on 3rd June, 2024 added new requirements for the recognition of stablecoins, enabling a wider scope of investments within the Dubai International Financial Centre (DIFC).

The DFSA currently recognises a limited number of crypto tokens, including Bitcoin (BTC), Ether (ETH), Litecoin (LTC), XRP (XRP), and Toncoin (TON). The updated rule allows funds to invest in unlisted crypto tokens as long as the total exposure does not exceed 10 percent of the fund's gross asset value.