The UAE Emerges as a Global Crypto Hub with New DAO and Stablecoin Regulations

The United Arab Emirates (UAE) is quickly becoming a major player in the world of cryptocurrencies and blockchain technology. Recent developments in the country’s regulatory landscape are paving the way for increased adoption and innovation in the crypto space.

One of the most significant advancements is the introduction of a legal framework for Decentralized Autonomous Organizations (DAOs) by the Ras Al Khaimah Digital Assets Oasis (RAK DAO). This new system aims to clarify how DAOs can operate legally within the country.

The DAO framework includes the establishment of a legal structure for DAOs, clarification of tax obligations and benefits, and the ability for DAOs to own both on-chain and off-chain assets. It also provides legal protection for DAO founders, members, and contributors, as well as guidelines for resolving disputes. 

The framework is set to be discussed at the DAO Legal Clinic on October 25, 2024.

Irina Heaver, a partner at NeosLegal, believes this move will greatly impact decentralized governance and the broader Web3 ecosystem in the UAE. She noted that DAOs can be registered remotely, making it easier for global participants to engage with the UAE’s growing virtual assets sector.

The Stablecoin Landscape in the UAE

In addition to the DAO framework, the UAE is making strides in the stablecoin space. The Central Bank of the United Arab Emirates (CBUAE) has granted in-principle approval to AED Stablecoin under its Payment Token Service Regulation framework. This approval positions AED Stablecoin as a frontrunner to become the first issuer of a regulated dirham-pegged stablecoin in the UAE.

The UAE approved AED Stablecoin LLC to launch AE Coin, a Dirham-pegged stablecoin regulated by the UAE Central Bank. AE Coin aims to enhance payments and transactions, integrating with DeFi and e-commerce platforms, supporting the UAE’s Digital Government Strategy 2025… pic.twitter.com/8UJoPOeDnf

— Mr. Man (@MrManXRP) October 15, 2024

The central bank’s licensing framework favors fully cash-backed assets and requires issuers to back their stablecoins with cash in a separate escrow fully denominated in dirhams within a UAE bank. Alternatively, they may hold at least 50% of reserve assets as cash, with the remaining portion invested in UAE government bonds and CBUAE monetary bills.

This development eases concerns about potential restrictions on crypto payments, which had arisen following the CBUAE’s recent release of its licensing framework. If fully approved, AED Stablecoin’s AE Coin could serve as a local trading pair for cryptocurrencies in exchanges and decentralized platforms, while allowing merchants to accept it for goods and services.

The UAE’s crypto-friendly regulatory environment has been attracting major players in the industry. OKX recently launched a retail and institutional trading platform in the UAE after obtaining a full license, which includes derivatives trading for qualified institutional investors. Additionally, crypto exchange M2 has opened a new system that allows residents to directly convert dirhams into Bitcoin and Ether.

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