UAE regulations may ban crypto payments, lawyer warns
Crypto and blockchain lawyer Irina Hever believes that the newly released regulations in the United Arab Emirates (UAE) may ban crypto payments in the country.
On June 5, the Board of Directors of the Central Bank of the United Arab Emirates (CBAE) discussed projects in the country's Financial Infrastructure (FIT) program, which aims to promote digital transformation.
At the meeting, the board approved payment token service regulations to regulate and license stablecoins. The new guidelines state that payment tokens in the country must be backed by the UAE dirham and cannot be linked to other currencies.
A UAE lawyer believes this is a ban on crypto payments.
Hever told Cointelegraph that the new regulations will ban crypto payments in the country. According to the regulations, the CBUAE “prohibits the acceptance of cryptocurrencies for goods and services unless they are licensed dirham payment tokens or registered foreign payment tokens.”
Blockchain advocates also think this new development could contradict the country's pro-business and pro-investment stance. Hever said:
“Historically, the UAE has thrived on foreign direct investment due to its liberal policies of no capital controls and an allowance of freedom of contract under its commercial law. This freedom allows parties to agree on their transaction terms, including payment methods and currencies.
Hever pointed out that the new development's compatibility with the country's economic principles and its impact on the flow of foreign investment is a concern.
The lawyer also believes that Tether (USDT) is the “backbone of transactions” in Web3 and crypto. With the UAE aiming to grow the sector, Hever believes the new rules will threaten growth in the space by prohibiting the use of stablecoins in the market.
Hever added: “This policy change may signal a favorable environment for the crypto industry, which is not beneficial for the UAE's image or ambitions in the digital economy.”
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The importance of strong industrial representation
Hever added that the UAE does not have industry associations like Switzerland, such as the Crypto Valley Association. The association protested against unfair regulations issued by the Financial Market Supervisory Authority (FINMA) in relation to shareholdings. Hever said:
“Not having one voice in the UAE web3 and crypto industry is a huge loss. Existing associations are fragmented and often serve as platforms for deal flow and business development rather than supporting the interests of the industry.
Heaver added that the lack of representation meant there was no one to oppose the policies, which she believed were “not taken seriously” and could hurt the growth of Web3 and crypto in the UAE.
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