Emily Walker
Ripple Labs is reportedly considering the introduction of a dirham-backed stablecoin in the United Arab Emirates (UAE), marking a new venture beyond its existing US-dollar stablecoin, RLUSD. This speculated move follows a recent blog entry by Ripple, dated November 7, 2024, titled “UAE Stablecoin Regulation: A Blueprint for Financial Innovation,” which suggests the company’s interest in creating a stablecoin backed by the dirham.
Is Ripple Considering A Dirham-Stablecoin?
The blog post discusses the newly implemented regulatory framework by the Central Bank of the United Arab Emirates (CBUAE), designed to enable the integration of dirham-backed and other stablecoins into the Emirati financial landscape. As stated in Ripple’s blog, “The new regulations serve as a sign of this transition, allowing for the integration of both dirham-backed and non-dirham stablecoins into the financial systems of the country.”
The framework set forth by the CBUAE is designed to elevate the UAE’s status as a leader in digital asset regulation, providing clear rules for issuing and utilizing AED-backed stablecoins for transactions, while granting permission for non-dirham stablecoins to be used in virtual asset dealings. The Ripple blog emphasizes that “Through the adoption of stablecoins, the UAE is establishing a foundation for more secure and streamlined financial systems.”
Ripple has already established a significant presence in the UAE. Notably, the National Bank of Abu Dhabi was the first bank in the region to adopt Ripple Payments, facilitating nearly $80 million in remittances in 2022. Additionally, XRP received regulatory approval from the Dubai Financial Services Authority (DFSA) for operations within the Dubai International Financial Centre (DIFC) late last year.
Ripple’s potential dirham-backed stablecoin aligns with the CBUAE’s goals of fostering a regulated stablecoin ecosystem to diminish the volatility of cryptocurrencies and improve investor safety. The blog elaborates, stating, “The CBUAE seeks to actively encourage a well-regulated environment for stablecoins, particularly those linked to the dirham, to counterbalance the fluctuations associated with other cryptocurrencies and enhance investor protection.”
Moreover, Tether has also expressed interest in the UAE stablecoin market, revealing plans to create a dirham-pegged stablecoin as an alternative to the US dollar. The UAE has quickly emerged as the sixth-largest cryptocurrency economy worldwide, managing nearly $400 billion in on-chain transactions from July 2022 to June 2023, according to Ripple’s data.
The regulatory strategy of the UAE stands in stark contrast to frameworks in other parts of the world, such as the United States’ proposed Clarity of Payment Stablecoins Act and the European Union’s MiCA regulations. Unlike these, the UAE allows unrestricted usage of dirham-backed stablecoins for payment transactions and only confines non-dirham stablecoins to virtual asset operations. The blog suggests that “This strategic approach will assist in addressing liquidity risks, market volatility, compliance issues, and operational hurdles.”
Ripple concludes, “With a population inclined towards technology and a government supportive of innovation, the UAE offers an ideal environment for the convergence of digital banking and blockchain within its financial system,” highlighting that stablecoins are poised to be integral to the country’s economic diversification efforts along with plans for a Central Bank Digital Currency (CBDC).
As of the latest update, XRP is trading at $0.55.