Three major institutions in Abu Dhabi—namely the ADQ sovereign wealth fund, First Abu Dhabi Bank (FAB), and International Holding Company (IHC)—announced plans to launch a new stablecoin backed by the Emirati dirham, as part of enhancing the UAE’s position as a global hub for digital finance.
Project details
• The stablecoin: The new currency will be fully backed by the Emirati dirham, ensuring its value stability and reducing price volatility associated with other digital currencies.
• Issuance and regulation: The currency is expected to be issued by First Abu Dhabi Bank, the largest bank in the UAE by assets, after obtaining the necessary regulatory approvals from the UAE Central Bank.
• Technical infrastructure: The currency will rely on ADI’s blockchain technology, which has been developed to provide fast, secure, and transparent transactions.
Regulatory framework
In December 2024, the UAE Central Bank granted initial approval to AED Stablecoin to issue AE Coin, the first stablecoin backed by the dirham to be officially regulated in the country. The regulatory framework requires that stablecoins be fully backed by cash reserves held in Emirati banks, or by 50% in cash and 50% in government bonds and financial bills issued by the Central Bank.
Expected impact
• Enhancing the digital economy: The stablecoin aims to facilitate local and global digital payments, which enhances the efficiency of the financial system and reduces the costs associated with traditional remittances.
• Support for financial innovation: The currency is expected to contribute to accelerating the adoption of modern financial technologies, such as decentralized finance (DeFi), and provide new financial tools for investors and companies.
• Attracting investments: By providing a clear and stable regulatory environment, the UAE seeks to attract more investments in the fintech and digital currency sectors.
Regional competition
The new stablecoin faces competition from global companies like Tether, which has announced partnerships with local companies to launch a stablecoin backed by the dirham in the UAE.
Conclusion
The launch of a stablecoin backed by the Emirati dirham represents a strategic step towards enhancing the UAE’s position as a global hub for digital finance. Through cooperation between major institutions and an advanced regulatory framework, the country aims to provide a conducive environment for financial innovation and attract investments in this growing sector.
