Crypto and blockchain lawyer Irina Heaver has raised concerns about recently released regulations in the United Arab Emirates (UAE), claiming that they could potentially prohibit cryptocurrency payments within the country.
The recent regulations, aiming boosting digital transformation, were discussed by the board of directors of the Central Bank of the UAE (CBUAE) on 5 June 2024 as part of the financial infrastructure (FIT) program.
During the meeting, the board approved the issuance of payment token services regulations, designed to regulate and license stablecoins. These new guidelines suggest that payment tokens in the UAE must be backed by the local currency, the UAE dirham, and cannot be linked to other currencies.
According to Heaver, these regulations effectively prohibit crypto payments within the country. Heaver said that the new rules prohibit the acceptance of cryptocurrencies for goods and services unless they are licensed dirham payment tokens or registered foreign payment tokens, which currently do not exist.
“Registered foreign payment tokens can only be used for buying other virtual assets,” she wrote on LinkedIn. “At the present there are no licenced Dirham payment tokens and no registered foreign payment tokens yet!”
New Regulations Could Negatively Impact UAE’s Stance On Crypto
The lawyer warned that this policy shift could create a less favorable environment for the crypto industry, potentially damaging the UAE’s image and its ambitions in the digital economy.
Heaver also highlighted the absence of industry associations in the UAE, unlike the Crypto Valley Association in Switzerland, which advocates for the industry’s interests.
In a statement to Cointelegraph, Heaver expressed concern that these regulations may contradict the UAE’s pro-commerce and pro-investment stance.
While highlighting the historical success of the UAE in attracting foreign direct investment due to its liberal policies, Heaver said the absence of capital controls and the freedom of contract under commercial law is crucial.
“This freedom enables the parties to agree on their transaction terms, including payment methods and currencies,” she said.
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Heaver claimed that Tether has played a key role in facilitating transactions in the Web3 and crypto space. However, the new rules risk hindering the sector’s progress by prohibiting the use of stablecoins in transactions.
Meanwhile Abu Dhabi Becomes A Crypto Hub
Abu Dhabi has been actively attracting crypto service providers and Web3 companies, establishing itself as a notable cryptocurrency hub.
In May 2024, crypto options trading platform QCP Capital received in-principle approval for regulated digital asset activities from ADGM. QCP is now the first Singapore-based crypto market maker and broker to receive a preliminary license in the region.
EXPLORE: How to Buy Bitcoin in Dubai, UAE
Additionally, popular firm Chainalysis recently established regional headquarters in Dubai. The company is actively engaging with local government stakeholders to provide advice on regulatory development in the crypto industry.
Last month, Swiss crypto asset manager, Digital Asset Solutions (DAS), announced its expansion into the UAE with the appointment of Csaba Dekany, a Swiss financial professional, as a strategic partner.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
