New regulatory framework for cryptocurrencies in the UAE: Greater transparency and security
The Central Bank of the UAE Regulates the Use of Cryptocurrencies
The Central Bank of the United Arab Emirates has approved new regulatory frameworks regarding cryptocurrencies, which will impact the way digital currencies are used in the country. The new regulation aims to regulate the use of stablecoins and other cryptocurrencies, providing greater transparency and legal certainty for businesses and users.
Benefits of the New Regulatory Frameworks
The new regulations are primarily intended to encourage safe interaction between FinTech companies and providers of services related to virtual assets. By introducing structured legal frameworks, the regulation aims to promote cooperation, eliminating risks associated with non-compliance and legal-financial ambiguities.
Utilization of Cryptocurrencies in the Emirates
The Central Bank of the UAE restricts the use of major cryptocurrencies, such as Bitcoin and Ethereum, to investment and trading purposes. At the same time, it allows the use of stablecoins pegged to the dirham only for domestic payments. These regulations are set to take effect in June 2025, reshaping the current landscape of digital currency use in the country.
Development of the Stablecoin Market
The stablecoin market is rapidly expanding, as confirmed by data from Chainalysis, indicating an increase in the value of stablecoin purchases to $40 billion in March 2024. The new regulations in the UAE underline the necessity of effective supervision, learned from past cryptocurrency market turmoil.
Requirements for Payment Token Issuers
According to the new law, no entity will be allowed to introduce a payment token without presenting a white paper for approval by the Central Bank beforehand. Issuers of payment tokens can only be subsidiaries or affiliates of banks, provided they meet strict licensing and regulatory requirements.
The new regulation by the Central Bank of the UAE represents a significant step towards regulating the use of cryptocurrencies in the country, ensuring greater transparency and security for all parties involved. The future of digital currencies in the United Arab Emirates seems to be firmly anchored in secure and stable legal frameworks.
