Paxos gets nod to issue dollar-backed stablecoins in UAE

Stablecoin issuer Paxos has received preliminary approval from Abu Dhabi’s Financial Services Regulatory Authority to issue U.S. dollar-backed virtual currencies and provide crypto-brokerage and custody services.

The development, announced on November 29, mirrors a similar regulatory progression in Singapore, where Paxos is set to introduce a U.S. dollar-backed stablecoin.

The firm’s expansion plans in stablecoins are contingent on full regulatory approval, with a focus on maintaining transparency and stability in its stablecoin reserves. Paxos previously collaborated with PayPal in August to launch the PYUSD stablecoin.

The approval aligns with the Abu Dhabi Global Market’s broader regulatory framework on digital ledger technology (DLT), introduced on November 1. The DLT Foundations Regulations, part of an initiative that began in 2018, aim to regulate blockchain foundations, Web3 entities, decentralized autonomous organizations (DAOs), and traditional foundations involved in DLT.

Under these regulations, entities can establish a DLT Foundation by submitting a charter that details assets, governance, token issuance, and other technical aspects. This regulatory step is seen as part of Abu Dhabi’s effort to create a structured environment for the growth of blockchain and cryptocurrency sectors.

Walter Hessert, Paxos Head of Strategy, commented, “Blockchain technology is revolutionizing the global financial system to be more open, secure and innovative. Today’s announcement marks yet another milestone in Paxos’ ability to provide billions of users with safe and trusted digital asset services. Our IPAs from the FSRA, on the heels of our IPA from the Monetary Authority of Singapore, solidify our commitment to pursuing international growth through regulated frameworks. Paxos is unique in the industry for this approach and we will continue expanding our regulatory licensing to serve global enterprises as a trusted, innovative partner.”

Earlier this year, the U.S. Securities and Exchange Commission (SEC) said it plans to sue Paxos for violating investor protection rules. The issuer was already told of the planned enforcement action as the regulator claims that Binance USD is an unregistered security.

Pasox has refuted the SEC’s claims and noted that it” categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws.” The company added that the SEC’s Wells notice pertains only to BUSD and there are no other allegations against its business.

The full scope of the investigation is unclear. But the US regulators have been questioning crypto firms over their practices around handling clients’ digital assets. The probe has gathered pace in the wake of the collapse of Sam Bankman-Fried’s crypto empire.