UAE regulations may lead to crypto payment ban, warns lawyer

Crypto and blockchain lawyer Irina Heaver believes newly-released regulations in the United Arab Emirates (UAE) may prohibit crypto payments in the country.

On June 5, the board of directors of the Central Bank of the United Arab Emirates (CBUAE) discussed projects under the country’s financial infrastructure (FIT) program, an initiative to boost digital transformation.

In the meeting, the board approved the issuance of payment token services regulations to oversee and license stablecoins. The new guidelines suggested that payment tokens in the country must be backed by UAE dirhams and cannot be linked to other currencies.

UAE lawyer believes this is a crypto payments ban

Heaver told Cointelegraph that the new rules forbid crypto payments within the country. Under the regulations, 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.”

The blockchain lawyer also thinks this new development may contradict the country’s pro-commerce and pro-investment stance. Heaver said:

“Historically, the UAE has thrived on foreign direct investment due to its liberal policies, including the absence of capital controls and the allowance for freedom of contract under the commercial law. This freedom enables the parties to agree on their transaction terms, including payment methods and currencies.”

Heaver also highlighted concerns about the new development’s alignment with the country’s economic principles and impact on foreign investment inflow.

The lawyer also believes that Tether has been the “backbone of transactions” in Web3 and crypto. With the UAE aiming to develop the sector, Heaver believes that the new rules risk its progress in the space by prohibiting the use of stablecoins in transactions.

“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.

The need for stronger industry representation

Heaver also added that the UAE lacks industry associations like the Crypto Valley Association in Switzerland. The association lobbied against unfavorable regulations imposed by the Financial Market Supervisory Authority (FINMA) in relation to staking. Heaver said:

“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 the lack of representation means that there’s no one who counters policies that she believes are “not thoroughly considered” and may be detrimental to the growth of Web3 and crypto in the UAE.

Source: https://cointelegraph.com/news/uae-crypto-payments-ban