Ripple Labs is reportedly exploring the launch of a dirham-backed stablecoin in the United Arab Emirates (UAE) as of November 7, 2024. This follows the UAE Central Bank's (CBUAE) new regulatory framework aimed at integrating both dirham-backed and non-AED stablecoins into the financial system.
The CBUAE's regulations are designed to enhance the UAE's position as a leader in digital asset regulation, allowing for the issuance of AED-backed stablecoins for payments while permitting non-dirham stablecoins to be used for virtual asset transactions. Ripple's blog highlights that this move will create safer and more efficient financial systems.
Ripple has a notable presence in the region, with the National Bank of Abu Dhabi utilizing Ripple Payments for remittances, totaling nearly $80 million in 2022. Additionally, XRP received approval from the Dubai Financial Services Authority (DFSA) for operations within the Dubai International Financial Centre (DIFC).
The potential introduction of a dirham-backed stablecoin aligns with the CBUAE's goal to create a regulated stablecoin environment that reduces volatility and enhances investor protection. Tether has also expressed interest in launching a UAE stablecoin pegged to the dirham.
The UAE's regulatory framework stands in contrast to other global regulations, such as the proposed Clarity of Payment Stablecoins Act in the U.S. and the EU's MiCA regulations, by allowing unlimited use of dirham-backed stablecoins for payments. This approach aims to manage risks related to liquidity and market volatility.
With a tech-savvy population and a government supportive of innovation, the UAE is poised for the integration of digital banking and blockchain, positioning stablecoins as vital to the country’s economic diversification and plans for a Central Bank Digital Currency (CBDC).