UAE’s Central Bank Approves AED Coin

The UAE central bank has approved AED Coin - a dirham-pegged stablecoin.

The UAE’s approach to stablecoins is unique. While many central banks are developing digital currencies (CBDCs) that no one seems to want, or are uncertain about coexisting with privately issued stablecoins, the UAE Central Bank (CBUAE) has made issuing dirham-backed stablecoins a licensed activity. Even Tether hasn’t launched an AEDT yet, awaiting permission from CBUAE - unlike its other stablecoins, which are issued without approvals.

This strategy makes stablecoins a strong alternative to CBDCs. CBDCs are typically limited to domestic use and require complex agreements and technical integration for cross-border transactions. Stablecoins, on the other hand, are well-suited for global transfers.

USDT and USDC have already facilitated a “parallel flow” of dollars across borders, bypassing the control of the U.S. Federal Reserve. The UAE has taken a different path: allowing private-sector issuance of AED-backed stablecoins, but under the supervision of CBUAE, VARA, and SCA.

Launching a CBDC involves creating, testing, and refining the system before rollout. By then, countries like the UAE will already have stablecoins circulating on established blockchains. Why use a restrictive, centrally controlled blockchain when a proven public blockchain offers the same solution?

Domestically, AED Coin will likely function similarly to a CBDC - a smart move by the UAE! Now we wait to see how successful AED Coin will be.

In the meantime, you can swap other stablecoins or any crypto at rabbit.io.