Crypto and blockchain lawyer Irina Heaver has raised concerns about newly-released regulations in the United Arab Emirates (UAE) that may prohibit crypto payments in the country.
On June 5, the Central Bank of the United Arab Emirates (CBUAE) held a meeting to discuss projects under the country’s financial infrastructure (FIT) program, aimed at boosting digital transformation. During this meeting, the board approved new regulations for payment token services, specifically targeting the oversight and licensing of stablecoins. The guidelines require that payment tokens in the UAE must be backed by UAE dirhams and cannot be linked to other currencies.
Heaver informed Cointelegraph that these new rules essentially ban the use of cryptocurrencies for payments within the UAE. According to her, the CBUAE is “prohibiting the acceptance of cryptocurrencies for goods and services unless they are licensed dirham payment tokens or registered foreign payment tokens, neither of which currently exist.”
She also expressed concern that this development may be at odds with the UAE’s traditionally pro-commerce and pro-investment stance. Historically, the UAE has attracted foreign direct investment due to its liberal policies, which include the absence of capital controls and the allowance for freedom of contract under commercial law. This has enabled parties to decide their transaction terms, including payment methods and currencies.
Heaver emphasized that the new regulations might not align with the UAE’s economic principles and could impact the inflow of foreign investments. She highlighted that stablecoins like Tether have been crucial in Web3 and crypto transactions. Given the UAE’s ambitions to develop the digital sector, Heaver warned that prohibiting stablecoins could hinder progress in this space.
“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.
She also pointed out the lack of strong industry associations in the UAE, similar to the Crypto Valley Association in Switzerland. This association successfully lobbied against unfavorable regulations imposed by the Financial Market Supervisory Authority (FINMA) concerning staking. Heaver noted:
“The absence of a united voice in the UAE’s Web3 and crypto industry is a significant disadvantage. Existing associations are fragmented and often serve as deal flow and business development platforms rather than advocating for the industry’s interests.”
Heaver added that without proper representation, there is no one to counter policies that she believes are “not thoroughly considered” and potentially harmful to the growth of Web3 and crypto in the UAE.