Cryptography firms in the United Arab Emirates are looking forward to a year of clear rules after the CBUAE recently okayed a framework for licensing stablecoins and its firms. This came through the “Payment Token Services Regulation” where the use of the virtual currency is set to be recognized and adopted into the economy of UAE.
Jason Allegrante, the Chief Legal and Compliance Officer at Fireblocks said, “This licensing system is the first step in that direction for stablecoin development in the UAE. Regulation can unlock further innovation by offering clear rules of the game to the business and safeguards to the customers. ”
The regulation requires that stablecoins to be pegged to the UAE dirham, expected to strengthen the local crypto market and attract global investors. Arushi Goel, Policy Lead for the Middle East and Africa at Chainalysis, highlighted the significance of this development: “There is a fact that fiat currency-stablecoins can help to stabilize the token, presence of AED-backed stablecoins can help to establish a viable domestic market in cryptocurrency. ”
This has directly impacted the market by endeavouring to enhance the safety and efficiency of payment token services, safeguard reserve assets from embezzlement, and work for consumers’ benefit simultaneously with encouraging innovation. Which is expected to enhance market credibility and increase market capital for the UAE’s financial markets. These, according to Goel, shall also pave way for the equity funding from the traditional financial players like the banks to meet the needs of the, retail and institutional investors.
The UAE has numerous regulatory bodies for the different aspects of cryptocurrencies with VARA for fiat-backed stablecoin except for AED-backed, which is under CBUAE. The regulatory approach of the Dubai Financial Services Authority (DFSA) as well as the Financial Services Regulatory Authority in the Abu Dhabi Global Market (ADGM) both have their rules regarding digital assets.
According to Allegrante, “This is just one more significant process towards establishing the UAE as the primary place for digital asset development, not only for the MENA region but for the entire world. ”
This release of this licensing system is therefore aimed to place the UAE as the leader in digital currency innovation putting pressure on other countries to advance their own digital currency and licensing systems.
