The Central Bank of the UAE (CBUAE) has granted preliminary approval for the issuance of AE Coin, a stablecoin pegged to the dirham, under its Payment Token Service Regulation, according to Gulf Today.

The company has emerged as the leader in the race to become the first issuer of a regulated stablecoin tied to the local currency. AE Coin could serve as a settlement currency for trading pairs on both centralized (CEX) and decentralized exchanges (DEX), as well as a means of payment for merchants.

Regulatory Features

As proposed by the Financial Services Regulatory Authority (FSRA), the market capitalization of stablecoins must match the value of reserves at the end of each business day. Issuers are required to maintain separate collateral pools for stablecoins based on different currencies, and the token’s price in fiat currency must remain fixed. This regulation provides asset holders with the ability to redeem stablecoins at their nominal value.

Market Competitors

In August, Tether announced plans to issue a dirham-backed stablecoin, supported by Phoenix Group and Green Acorn Investments.

Strategic Significance of the UAE

In 2023, Binance named the UAE as a key hub for its business, while Coinbase indicated the possibility of using the UAE jurisdiction as a strategic base for international expansion.