The United Arab Emirates (UAE) may soon face a ban on crypto payments due to recently introduced regulations. On June 5, the Central Bank of the United Arab Emirates (CBUAE) board discussed projects under the financial infrastructure transformation (FIT) program and approved new payment token services regulations. These regulations aim to oversee and license stablecoins, mandating UAE dirhams back that payment tokens in the UAE and not linked to other currencies.
Concerns from the Legal Community
A prominent crypto and blockchain lawyer, Irina Heaver told Cointelegraph that these new rules effectively ban crypto payments within the country. Heaver explained that the CBUAE regulations prohibit the acceptance of cryptocurrencies for goods and services unless they are licensed dirham payment tokens or registered foreign payment tokens, neither currently exist. This move could be seen as contradictory to the UAE’s historically pro-commerce and pro-investment stance, which has attracted foreign direct investment due to liberal policies and the freedom of contract under commercial law.
Potential Impact on the Digital Economy
Heaver expressed concerns that the new regulations might hinder the UAE’s ambitions in the digital economy. She pointed out that Tether has been integral to transactions in the Web3 and crypto spaces. By prohibiting the use of stablecoins in transactions, the new rules could undermine the progress of the sector.
Irina Heaver warns of new UAE regulations. Source: Irina Heaver
“This policy shift could signal a less favorable environment for the crypto industry, which is not beneficial for the UAE’s image or its ambitions in the digital economy,” Heaver added.
Call for Stronger Industry Representation
Heaver also highlighted the need for stronger industry representation in the UAE, noting the absence of robust industry associations like the Crypto Valley Association in Switzerland. Such associations can effectively lobby against unfavorable regulations. She remarked that existing associations in the UAE are fragmented and often focus on business development rather than advocating for the industry’s interests.
“The absence of a united voice in the UAE’s Web3 and crypto industry is a significant disadvantage,”
Heaver said. She emphasized that without a cohesive representation, there’s no counter to policies that could be detrimental to the growth of Web3 and crypto in the UAE.
The new regulations raise concerns about the future of crypto payments in the UAE, potentially creating a less favorable environment for the burgeoning digital economy.
