UAE Launches First Dirham-Pegged Stablecoin

• **AED Stablecoin promises innovation and financial inclusion.**
• **Stablecoin market grows 55% in UAE.**
• **Tether plans to compete with AE Coin in the Middle East.**

The Central Bank of the United Arab Emirates (CBUAE) granted preliminary approval for AED Stablecoin, marking a milestone in the integration of digital assets into the country’s financial system. AE Coin, a stablecoin pegged to the dirham (AED), promises fast, secure and cost-effective transactions, while positioning the UAE as a strategic hub for cryptocurrency innovation.

The future of money starts here!

AE Coin is now the UAE's first licensed stablecoin, approved by the Central Bank. 🚀 #AEcoin #DigitalInnovation #UAE pic.twitter.com/1wHeGLJvzi

— AE Coin (@AECoin_UAE) December 10, 2024

With a 1:1 peg to the dirham, AE Coin provides stability to users, ensuring trust and eliminating the volatility associated with other cryptocurrencies. Regulated under the strict CBUAE, the stablecoin must maintain reserves backed entirely by cash deposited in local banks. Alternatively, up to 50% of these reserves may be invested in government bonds or CBUAE Monetary Bills, with maturities of up to six months.

The AED Stablecoin will face competition from major players in the market, such as Tether. Tether recently announced plans to launch its own dirham-pegged stablecoin in partnership with Green Acorn Investments and Phoenix Group. With over $138 billion in market cap, Tether’s flagship stablecoin, USDT, dominates the global market and is now looking to expand its presence in the Middle East.

Furthermore, the stablecoin market in the region is booming. In 2024, the volume of stablecoins received on centralized and decentralized exchanges in the UAE reached $9,8 billion, representing a 55% increase over the previous year. Currently, stablecoins account for 51% of all cryptocurrency activity in the country, surpassing assets such as Bitcoin (19%) and Ethereum (9%).

The integration of stablecoins like AE Coin into the traditional financial system promises to revolutionize sectors such as e-commerce, international remittances, and decentralized finance (DeFi). For merchants and businesses, these digital currencies represent a modern alternative to traditional payment methods, combining efficiency and security.

The CBUAE also highlighted the importance of robust regulations to mitigate risks associated with digital assets. The country seeks to create a trustworthy and innovative ecosystem by attracting blockchain and cryptocurrency companies to strengthen its position as a global leader in the sector.

With the support of CBUAE, AE Coin is well-positioned to transform the UAE’s financial market. The stablecoin is expected to cater to both institutional investors and retail users, who account for the majority of stablecoin transactions in the country. Data indicates that 93% of stablecoin transfers in the UAE are conducted by retailers, while the aggregate value is dominated by institutional transactions.

This initiative reinforces the country’s commitment to embracing emerging technologies and driving the digital economy, ensuring financial inclusion and innovation. The introduction of dirham-pegged stablecoins is a strategic step towards solidifying the UAE’s role as a global hub for digital assets and modern financial solutions.