UAE Central Bank Approves Stablecoin Licensing System to Boost Digital Transactions

The Central Bank of the United Arab Emirates (CBUAE) has approved a new system for overseeing and licensing stablecoins, aiming to clarify regulations surrounding their issuance and supervision. The regulations stipulate that stablecoins must be backed by UAE dirhams and cannot be linked to other currencies, digital assets, or algorithms. Merchants and service providers will only be permitted to accept dirham-backed tokens. This decision comes as part of the government's financial infrastructure transformation (FIT) program, which seeks to enhance digital transactions, drive the country's digital economy, and foster innovation. Additionally, the Dubai Financial Services Authority (DFSA) recently updated its rules for stablecoin recognition, allowing investments in unrecognised crypto tokens as long as they do not exceed 10% of the funds' gross asset value.