The UAE is set to launch AE Coin, its first national stablecoin, following regulatory approval in December 2024. This move is part of the UAE Central Bank’s broader strategy to enhance digital payments and solidify the country’s role as a global financial hub.
The UAE launched the “Digital Dirham” strategy in March 2023, which aims to provide regulatory norms for cryptocurrencies as well as stablecoin solutions. The finalised AE Coin is ready to disrupt retail payments by offering swift, instant settlements at a lower cost and faster operational speeds than traditional payment systems.
Stablecoin products allow users to stabilise their financial positions because they are tied to stable assets, such as US dollars, whereas Bitcoin and other traditional cryptocurrencies are prone to significant market price fluctuations.
Sebastien Badault, Vice President at cybersecurity firm Ledger, emphasised the potential of stablecoins in the UAE, noting, “In the UAE, where the dirham is pegged to the US dollar, stablecoins will serve as a gateway to broader crypto trading.”
The UAE’s primary remittance processing centre is considering AE Coin as a solution to optimise money transfer processes with a focus on migrant workers and small firms. AE Coin can significantly increase individual crypto user involvement by supporting 93% of stablecoin transfers conducted in UAE retail transaction amounts. According to Chainalysis, “93% of stablecoin transfers in the UAE are retail-sized, highlighting their role as a gateway for retail market participation.”
The global adoption of stablecoins is growing, with countries like El Salvador, Australia, and China already integrating these digital currencies into their financial systems. Experts see stablecoins as a vital financial tool in regions where traditional banking is either limited or slow. “Stablecoins can provide a vital financial alternative in regions with limited access to banking,” said Sebastien Badault.
In addition to the launch of AE Coin, the UAE Central Bank has introduced a new digital dirham symbol, further reinforcing the country’s commitment to advancing digital currencies. However, experts caution that the success of stablecoins will depend on regulatory clarity, transparency, and consumer protection. Reece Merrick, Managing Director at Ripple, stated, “Clear regulation is fundamental to all financial services, including blockchain technology.”
Stablecoins offer benefits over traditional financial systems by providing lower fees and faster transaction times. With the UAE being one of the top ten remittance senders globally, AE Coin is expected to significantly improve the efficiency of sending money abroad.
As global financial institutions explore stablecoin technology, the UAE’s regulatory environment may serve as a model for other countries looking to integrate digital currencies into their financial systems.