Recently, Tether, the world's largest stablecoin developer, announced an important plan to launch a stablecoin pegged to the UAE dirham. This innovative move, supported by the cooperation of Phoenix Group, an Abu Dhabi-listed crypto company, marks that the UAE's position in the global crypto market is further improving. The UAE, especially Dubai and Abu Dhabi, has attracted more and more international companies and investors with its friendly crypto policies, becoming an important hub for global cryptocurrencies and Web3 technologies. Tether's stablecoin USDT is currently one of the most influential cryptocurrencies in the world, with a market value of more than $1170 billion, accounting for nearly 70% of the stablecoin market. However, the launch of a token pegged to the UAE dirham shows that Tether is further expanding its market layout to adapt to the needs of different regions around the world. This plan not only provides a new payment tool for the global market, but also demonstrates the UAE's open attitude towards cryptocurrencies and regulatory maturity.
Behind the Tether plan,The Central Bank of the United Arab Emirates (CBUAE) has provided a clear regulatory framework for companies that want to launch tokens pegged to fiat currencies through its latest Payment Token Services Regulation released in June this year.After studying the entire bill, the Aiying team has sorted out the following important contents for everyone.
Payment Token Services Regulation
The Payment Token Services Regulation (PTS) introduced by the UAE Central Bank lays a comprehensive and clear regulatory foundation for the issuance and operation of digital assets and stablecoins. The following are the core contents of the bill:
1. Licensing requirements
- Who needs a permit?Any company that wishes to operate and provide payment token services in the UAE, whether domestic or foreign, needs to obtain a license from the UAE Central Bank for both payment token issuance, payment token conversion, and payment token custody and transfer.This includes issuers of stablecoins pegged to fiat currencies and other service providers related to payment tokens.
- how to apply?Companies need to submit detailed application materials to the UAE Central Bank, including company structure, business plan, financial status and compliance measures. The application process requires companies to prove their ability to maintain the stability of tokens and protect the rights of consumers. Companies also need to pass the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) compliance reviews to ensure the legitimacy of funds.
2. Reserve AssetsClaim
- The criticality of reserve assetsTo ensure that the value of stablecoins is not affected by market fluctuations, the bill requires issuers to maintain sufficient reserve assets. This means that all stablecoins in circulation must be backed by an equivalent amount of fiat currency or highly liquid assets.
- How to ensure value stability?Issuers need to mark-to-market their reserve assets every day to ensure that the market value of the assets is equal to the face value of the tokens in circulation. For companies that issue tokens pegged to multiple fiat currencies, the bill requires them to set up independent reserve asset pools for each token to ensure that the value of each token is independent and stable.
3. Data protection and consumer protection
- Consumer protection measuresThe bill provides detailed provisions for consumer protection, ensuring that payment token service providers are responsible for the security of customers' funds and data. Companies must develop strict security measures to prevent data leaks and fraud, and should establish a transparent customer complaint mechanism.
- Data protectionThe Act requires companies to comply with strict data protection policies, including data storage, backup and transmission. Companies need to ensure the security of customers' personal information and financial data during transactions to prevent unauthorized access or data leakage.
4. Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) Regulations
- Strict AML/CFT compliance requirementsThe bill imposes strict requirements on anti-money laundering and counter-terrorist financing compliance. All payment token service providers must establish effective AML/CFT policies, including customer identity verification (KYC) and monitoring of suspicious transactions.
- Compliance ProcessCompanies need to appoint a dedicated compliance officer to be responsible for AML/CFT matters and report their compliance status to the central bank on a regular basis. Companies also need to conduct internal audits to ensure that their operations meet global anti-money laundering and counter-terrorist financing standards.
In order to protect the stability of the market, the Act sets strict restrictions on certain services. For example,The issuance or promotion of algorithmic stablecoins and privacy tokens in the UAE is prohibited. In addition, the bill also restricts certain services related to foreign payment tokens to ensure that these services are only carried out under the premise of compliance.
Recently, a government-owned bank in the UAE, Ras Al Khaimah National Bank (RAKBANK), plans to create a digital asset management platform for UAE residents. Because it involves custody business, it needs to obtain approval from the UAE Central Bank in accordance with the Payment Token Services Act.
In short, if you want to issue or manage stablecoins in the UAE, such as tokens pegged to the dirham, you need to apply for a license from the central bank and prove that you have sufficient funds to support these tokens. At the same time, you need to ensure the security of customer data and establish a complaint mechanism to protect consumer rights. In order to prevent illegal activities, you also have to monitor customer identities and transactions at all times to ensure that everything is legal and compliant.Aiying Payment is paying attention to the dynamics of the global cross-border payment and stablecoin markets, and is also helping many Wed3 and traditional institutions to provide corresponding compliance solutions. The UAE (Dubai, Abu Dhabi) is also a market we focus on, and there are many customers who are deeply rooted in the local area. We hope that WeChat can have a deeper exchange with everyone.
Regulation link: https://rulebook.centralbank.ae/en/rulebook/payment-token-services-regulation