Banking & Finance

UAE stablecoin gets green light from Central Bank

December 11, 2024, 8:21 AM

The Bitcoin Mena conference in Abu Dhabi, where AE Coin announced its approval

AE Coin is pegged to dirham
Makes cryptocurrency less volatile
Follows update to UAE’s crypto rules

UAE businesses could soon be able to accept AE Coin, the first regulated cryptocurrency in the Emirates.

The AE Coin, which has just received regulatory approval from the Central Bank of the UAE, is pegged to the dirham, making it less volatile than other cryptocurrencies. Cryptos tied to a fiat, or government-issued, currency are known as “stablecoins”.

“AE Coin is built on blockchain technology, and designed to provide users with stability, efficiency and security in their transactions,” AE Coin general manager Ramez Rafeek wrote on a LinkedIn Post announcing the coin’s approval by the Central Bank.

He also told Abu Dhabi’s The National newspaper the coin would be available “soon”.

The stablecoin is “fully backed by reserves held within the UAE. This ensures consistent value and eliminates the risk of price volatility, making it a trusted medium of exchange,” Rafeek said.

The launch of AE Coin follows the Central Bank’s updated cryptocurrency regulations announced in July. These allow the adoption of dirham-backed stablecoins while excluding other digital assets, such as bitcoin and dollar-pegged stablecoins, for payments within the country.

Financial free zones are exempt from this regulation.

The rules will affect UAE crypto businesses as well, since they will be required to submit a white paper to the Central Bank and receive approval to issue a payment token, adding a layer of scrutiny to assess the security of the token before it goes live.

Rafeek emphasised the AE Coin’s capacity to facilitate faster and more cost-effective transactions and build trust in digital currencies. The coin is expected to be distributed through a network of agents.

The stablecoin market has a global market capitalisation of more than $207.5 billion, with leading players such as Tether and Binance USD driving adoption.

Tether, which has a market cap of $138 billion, plans to launch its own dirham-pegged stablecoin in the UAE. It also has stablecoins tied to the euro, Mexican peso, yuan and gold.