Crypto and blockchain lawyer Irina Heaver has raised concerns about newly-released regulations in the United Arab Emirates (UAE), which she believes may effectively prohibit crypto payments in the country.
On June 5, the Central Bank of the United Arab Emirates (CBUAE) discussed projects under the country’s financial infrastructure (FIT) program, aimed at promoting digital transformation. The board approved new regulations for payment token services, mandating that payment tokens must be backed by UAE dirhams and not linked to other currencies.
Impact on Crypto Transactions
Heaver contends that these regulations amount to a ban on crypto payments within the UAE. According to the new rules, 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.”
Heaver argues that this development contradicts the UAE’s historically pro-commerce and pro-investment stance. She notes that the UAE has thrived on foreign direct investment due to its liberal policies, including the absence of capital controls and the freedom of contract under commercial law. These policies allow parties to agree on transaction terms, including payment methods and currencies.
Concerns for Economic Principles and Investment
Heaver expressed concerns about the alignment of these new regulations with the country’s economic principles and their potential impact on foreign investment inflows. She emphasized the crucial role that Tether, a stablecoin, has played in Web3 and crypto transactions. Heaver believes that prohibiting the use of stablecoins in transactions could hinder the UAE’s progress in the digital economy.
“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 stated.
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Need for Stronger Industry Representation
Heaver also pointed out the lack of strong industry associations in the UAE, similar to the Crypto Valley Association in Switzerland, which lobbied against unfavorable regulations by the Financial Market Supervisory Authority (FINMA) concerning staking.
“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 explained.
She added that the lack of representation means there is no one to counter policies that she believes are “not thoroughly considered” and may be detrimental to the growth of Web3 and crypto in the UAE.
