Monday , June 21 2021

The Central Bank denies accepting crypto assets as official cash

The Central Bank has issued a “Stored Value Facility System” and is in the process of issuing a “Retail Payment Service System” which will determine the regulatory treatment for crypto assets. In light of the allegations reported by several publications that the Central Bank has implicitly applied a “legal dye” to cryptocurrencies in the UAE, the bank clarified the purpose of the recently issued “Stored Value Facility System”.
The Central Bank indicates that at this time it does not accept (or approve) encrypted or virtual assets as legal cash waiving liability in the Emirates, as the UAE dirham is the only legal currency with absolute shifting power in the country.

The UAE dirham is the only legal currency which has absolute usage power

“Stored Value Facility System” aims to license institutions that issue or provide stored value facility in the UAE. As defined in the system, a stored value facility is a facility where an amount of money or a value for money is received (which may include, among other elements, crypto or virtual assets) in exchange for storing that value for money. Since the UAE Central Bank does not currently recognize crypto assets as legal cash which exempts liabilities in the United Arab Emirates, it does not recognize these assets as a payment method and can only be used as investment assets with high potential risk.
The Central Bank is currently preparing a new system called “Retail Payment Service System”, which will incorporate the concept of a payment token which is defined as a cryptocurrency asset, backed by fiat currency and used for payment purposes.
By issuing a new “stored value facility system”, the “center” aims to facilitate the entry of financial technology institutions (Fintech) and non-bank payment service providers into the UAE market, while continuing to protect client funds, ensure proper workflow, and support development. payment products and services. .

Facilitating the entry of financial technology institutions (Fintech) and non-bank payment service providers into the UAE market

Major improvements have been included in the new version of the “stored value facility system” compared to previous versions, and include allowing non-bank payment service providers to obtain licenses without the need to establish a company together with a licensed bank, and where the licensed bank is the major shareholder ; Reducing the capital requirement from 50 million dirhams to 15 million dirhams; Allows indirect digital subscriber lists instead of physical verification.
The new “stored value facility” system provides a suitable infrastructure for equal competition between market participants and encourages competition and innovation in stored value products and retail payment services, by removing certain restrictions on licensing, to encourage entry of Fintech institutions and various payment service providers. non-bank.

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