Legal Expert Criticizes UAE’s New Cryptocurrency Regulations

The updated regulations in the UAE could potentially ban cryptocurrency payments in the country. This conclusion was reached by legal expert Irina Khiver.

She referred to the approval on June 5 by the board of directors of the UAE Central Bank (CBUAE) of amendments to the regulation on the supervision and licensing of stablecoins. According to the document, such assets must be backed by dirhams and cannot be pegged to other currencies.

In her view, this effectively means a ban on cryptocurrency payments within the state.

“CBUAE excludes the possibility of using digital assets unless they are licensed payment tokens in dirhams or registered foreign payment tokens, which currently do not exist,” she explained.

According to Khiver, the new regulation may contradict the country’s stance on supporting commerce and investments.

The legal expert also expressed concerns about compliance with the UAE’s economic principles and the impact on investment inflows.

She noted that the [effectively illegal] USDT serves as the basis for transactions in Web3 and cryptocurrencies.

“Such a policy change could mean creating a less favorable environment for the industry, which is not beneficial for the UAE’s image and their ambitions in the digital economy,” she emphasized.

The expert also lamented the lack of industry associations like the Crypto Valley Association in Switzerland.

“The absence of a unified voice in the Web3 and cryptocurrency industry in the UAE is a significant drawback. Existing associations are fragmented and often serve as platforms for deal-making and business development rather than advocating for industry interests,” she added.

According to Khiver, the lack of representation means there is no one to oppose policies that, in her opinion, are “insufficiently thought out” and could harm the development of Web3 and cryptocurrencies in the UAE.

In June 2024, Paxos introduced a stablecoin USDL offering a 5% annual yield. The issuer of the “stablecoin,” Paxos International, is regulated in the UAE by the Financial Services Regulatory Authority within the Abu Dhabi Global Market Department.