New Rules in the UAE May Lead to a Ban on Crypto Transactions – Expert
Date: 2024-06-27 Author: Henry Casey Categories: CRYPTO PAYMENTS
At the beginning of June 2024, the Central Bank of the UAE (CBUAE) approved new rules regarding the issuance, regulation and licensing of stablecoins. These measures were perceived as a step towards streamlining the cryptocurrency market in the country, but lawyer Irina Khiver warns that they could lead to a complete ban on crypto transactions.
Restrictions on Payment Tokens
The new rules stipulate that only certain dirham-backed payment tokens will be allowed in the UAE. According to comments from KARM Legal Consultants founder Kokila Alah to UNLOCK Blockchain, payment tokens must be backed by dirhams and cannot be linked to other currencies, virtual assets or algorithms. Merchants and service providers will only be able to accept such cryptoassets as a means of payment.
“The rules bring clarity to the issues of issuance, licensing and supervision of the issuance of payment tokens,” Alah noted.
Potential Consequences
Irina Khiver believes that these measures could significantly limit the use of crypto assets in the UAE. She pointed out that any other “licensed” crypto assets not backed by dirhams would only be able to be used to purchase tokens, not products or services. The regulator may apply various sanctions against violators of the new rules.
“This policy shift may signal a less favorable environment for the crypto industry, which is not good for the UAE’s image or its ambitions in the digital economy,” Hiver told Cointelegraph.
One of the problems, according to Hiver, is the current lack of registered payment tokens or dirham-backed tokens in the UAE. This creates uncertainty for crypto companies and users who are already actively using cryptocurrencies.
Impact on the Crypto Industry
Hiver believes that the new rules could have a negative impact on the development of the crypto industry in the UAE. She emphasized that the country does not have an industry association that could protect the interests of crypto market participants and promote more balanced regulation.
Other Measures to Restrict Cryptocurrencies
Earlier it became known that the UAE banned cryptocurrency mining on agricultural sites due to fears that this could cause a surge in electricity consumption. This decision also demonstrates the authorities' desire to control and limit the use of crypto-assets in various sectors of the economy.
The introduction of new rules for regulating and licensing stablecoins in the UAE is aimed at strengthening control over the cryptocurrency market. However, according to experts, such measures could lead to significant restrictions on the use of crypto-assets and negatively affect the development of the crypto-industry in the country. It is important to monitor the further steps of regulators and their impact on the market.
