Key Takeaways
- Reportedly, the regulations clarify the issuance, licensing and supervision of AED-backed payment tokens.
- Kokila Alagh said that the payment tokens must be backed by UAE dirhams and cannot be linked to other currencies or digital assets
The Central Bank of the United Arab Emirates (CBUAE) has approved the issuance of a new system to oversee and license stablecoins.
As per reports, the meeting chaired by UAE vice president and CBUAE chairman Sheikh Mansour bin Zayed Al Nahyan involved discussions on the government’s financial infrastructure transformation (FIT) program.
The first phase of UAE CBDC implementation marks one of nine initiatives in the CBUAE’s FIT Programme. The first is the soft launch of mBridge, which will help the bank facilitate real-time cross-border transactions to settle international trades.
Earlier this month, the Central Bank of the UAE launched the Minimum Viable Product (MVP) platform of the mBridge project – a multi-central CBDC common platform for wholesale cross-border payments and settlement. This was also the first multi-CBDC platform which has reached the MVP phase, ready for use by early adopters.
Reportedly, the regulations discussed in the latest meeting clarify the issuance, licensing and supervision of AED-backed payment tokens. While the specifics of the meeting remain under wrap, a major chunk of the meeting dealt with how the FIT programme can be leveraged to launch CBDCs.
As per KARM Legal Consultants founder Kokila Alagh, the payment tokens must be backed by UAE dirhams and cannot be linked to other currencies, digital assets or algorithms. She further added that merchants and service providers can only accept AED-backed tokens and no other virtual assets.
Dubai Financial Services Authority(DFSA) has also recently updated its rules for stablecoin recognition. One major change includes allowing domestic qualified investor funds to invest in unrecognized tokens, provided the exposure does not cross 10% of the fund’s gross asset value. Until now, DFSA has only recognized a few crypto tokens such as Bitcoin, Ether, Litecoin and Toncoin.
The latest development comes a day after China and the UAE signed memorandums of understanding, emphasizing their shared recognition of the crucial role of CBDCs in facilitating cross-border trade.
