The Central Bank of the United Arab Emirates (CBUAE) has granted in-principle approval to AED Stablecoin, making it a leading candidate to issue the UAE's first regulated dirham-pegged stablecoin. This approval addresses previous concerns following a CBUAE regulation prohibiting cryptocurrencies for payments unless supported by licensed dirham-pegged tokens. If fully approved, AED Stablecoin could enable local cryptocurrency trading and merchant acceptance. Issuers must back their stablecoins with cash in a separate escrow with a UAE bank. The CBUAE's framework also excludes algorithmic stablecoins and privacy tokens, favoring fully cash-backed assets. Tether, the largest stablecoin issuer, also has an initiative to launch a dirham-pegged stablecoin and other major players are expanding operations in the UAE due to its crypto-friendly regulatory environment.

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