Bitcoin Mena: UAE's first regulated stablecoin given final approval and will be available 'soon'

AE coin will be made available through agents who will enable its purchase and distribution, general manager says

Visitors at the Bitcoin Mena held at ADNEC in Abu Dhabi. Pawan Singh / The National

AE Coin, the stablecoin that is the first regulated digital currency in the UAE, has been granted final approval by local authorities and is scheduled to be launched “soon”, its general manager has said.

The digital asset received the final licence from the Central Bank of the UAE, AE Coin said at Abu Dhabi Finance Week on Tuesday.

It will be made available to customers through agents appointed by AE Coin, representing “a new era in digital transactions”, Ramez Rafeek told The National ahead of the announcement at the Bitcoin Mena conference, also in the UAE capital.

Abu Dhabi-based AE Coin will be “bringing together stability, efficiency and security under the trusted regulatory framework of the Central Bank of the UAE”, he said.

The agents will “facilitate the purchase and distribution of the stablecoin”, he added.

Having the dirham pegged to the US dollar is also an advantage. The Emirates first pegged its currency to the greenback in 1997, aimed at stabilising the exchange rate between the countries to support trade and reduce risk.

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

A stablecoin is a type of cryptocurrency that is pegged to a fiat currency and tends to be less volatile unlike Bitcoin, where swings are influenced by simple factors such as tweets.

They aim to address cryptocurrencies' shortcomings by pegging their value to a unit of an underlying asset, are often issued on faster blockchains and backed by state-issued tenders such as the dollar, pound, euro and highly liquid reserves including government treasuries or commodities such as precious metals.

Also, a stablecoin is different from a central bank digital currency: the former is privately issued, while the latter is government-backed. Both, however, aim to make transactions faster, cheaper and more secure.

The stablecoin industry has a market capitalisation of more than $207.5 billion as of Monday, data from CoinMarketCap shows. Tether, the world's biggest stablecoin that in August announced plans to launch its own asset in the UAE, leads with more than $138 billion.

The UAE central bank's latest regulation on stablecoins, meanwhile, is expected to establish a clear operational framework for cryptocurrencies when introduced next year and usher in the mainstream acceptance of decentralised currencies within the country.

The new crypto regulation, issued in July, will only allow businesses and vendors in the Emirates to accept cryptocurrencies for goods and services if they are dirham-backed stablecoins.

This means other digital assets such as Bitcoin and Ether, the world’s biggest cryptocurrencies by market capitalisation and US dollar-backed stablecoins like Tether or Binance USD will not be allowed for those types of payments in the UAE. However, financial-free zones are excluded from this regulation.

Stablecoins are seen as supporting the UAE's digital economy strategy, reflecting the country's pioneering role in financial innovation, Mr Rafeek said.

“It demonstrates the country's leadership in blockchain technology and digital assets. The UAE is setting the standard for other GCC nations, establishing itself as a hub for advanced financial technologies,” he said.