Source: Aiying Payment Compliance

The Central Bank of the United Arab Emirates (CBUAE) has recently granted preliminary approval for the AED Stablecoin, which means provisional approval, marking a significant step for the company in becoming the first regulated issuer of a Dirham stablecoin in the UAE. This approval injects new momentum into the field of Digital Money in the UAE and propels the country towards its goal of becoming a global encryption financial center.

This development paves the way for future Stable Coin usage. Under this framework, only licensed Dirham Stable Coins can be used for payment. This not only alleviates concerns about payment restrictions due to the Cryptocurrency regulatory framework issued by the UAE Central Bank, but also paves the way for future Stable Coin usage. If **fully approved, the aeternityD Stablecoin's aeternity Coin can be used as a local Cryptocurrency trading pair on exchange and Decentralization platforms, and merchants can also accept it as a means of payment.

The core content of the Payment Token Services Act

The Central Bank of the United Arab Emirates has provided a clear regulatory framework for enterprises that wish to issue Tokens pegged to fiat currencies through the Payment Token Services Regulation, which was released in June this year. The Aiying team has conducted an in-depth analysis of this legislation and summarized the following key points.

The "Payment Token Service Act" has laid a comprehensive and clear regulatory foundation for the issuance and operation of digital assets and stablecoins, and the following are the core contents of the Act:

• License Requirement
• Who needs to get licensed? Any enterprise, whether domestic or foreign, that wishes to operate in the UAE and provide payment Token services, including Token issuance (Payment Token Issuing), Token conversion (Payment Token Conversion), Token custody and transfer (Payment Token Custody and Transfer), needs to obtain a license from the Central Bank of the UAE. This includes stablecoin issuance businesses pegged to legal tender and other service providers related to payment Token.
• How to apply? Enterprises need to submit detailed application materials to the Central Bank of the United Arab Emirates, including company structure, business plan, financial status, and Compliance measures. The application process requires the enterprise to prove its ability to maintain the stability of Token and safeguard consumer rights. Enterprises also need to undergo Compliance reviews for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) to ensure the legality of funds.
• Reserve Asset Requirements

• The key to reserve assets is to ensure that the value of Stable Coin is not affected by market Fluctuation. The bill requires issuers to maintain an adequate reserve of assets. This means that all circulating Stable Coins must be backed by an equivalent legal tender coin or highly liquid assets.
• How to ensure value stability? The issuance platform needs to mark-to-market its reserve assets every day to ensure that the market value of the assets is equal to the face value of the circulating tokens. For companies with multiple fiat currency pegged tokens on the issuance platform, the regulations require them to establish separate reserve asset pools for each token to ensure the independent and stable value of each token.

• Data Protection and Consumer Protection +Consumer Protection Measures The bill provides detailed provisions for consumer protection, ensuring that payment Token service providers are responsible for the security of customer funds and data. Companies must implement strict security measures to prevent data leaks and fraudulent activities, and establish a transparent customer complaint mechanism.

• Data Protection Act requires companies to comply with strict data protection policies, including the storage, backup, and transmission of data. Companies need to ensure the security of customers' personal information and financial data during transactions to prevent unauthorized access or data leakage.

• Anti-Money Laundering（AML） and Counter-Terrorist Financing (CFT) Regulations

• The bill imposes strict requirements on Anti-Money Laundering and Counter-Terrorist Financing compliance. All payment Token service providers must establish effective AML/CFT policies, including customer identity verification (KYC) and monitoring of suspicious transaction activities.
• Compliance process Enterprises need to appoint dedicated Compliance officers to be responsible for AML/CFT affairs and regularly report their Compliance status to the Central Bank. Enterprises also need to ensure through internal audits that their operations comply with global anti-Money Laundering and counter-terrorist financing standards.

To maintain market stability, the regulation imposes strict restrictions on certain services. For example, it prohibits the issuance or promotion of Algorithmic Stable Coins and Privacy Tokens within the UAE. In addition, it restricts certain services related to foreign payment Tokens, ensuring that these services are only conducted under Compliance.