By: Akshata Namjoshi, Associate Partner, KARM Legal
Kabir Hastir Kumar, Associate, KARM Legal

Blockchain and digital assets are transforming the financial landscape, with increasing applications in payments, lending, and asset management.

Stablecoins are particularly being explored for payments due to their price stability. According to the CoinGate Q1 2024 report, USDT transactions accounted for 41.4% of all crypto payments, highlighting a growing trend towards stablecoin use in commerce. Additionally, Deloitte’s report underscores that over 60% of merchants express significant interest in accepting cryptocurrency payments, aiming to enhance customer experience and expand their market reach.

Merchants are increasingly interested in enabling their customers to pay with cryptocurrency. They partner with various acquiring platforms that facilitate these transactions through third-party crypto liquidity providers. Enabling such payment options benefits merchants by expanding their customer base, offering payment flexibility, and enhancing overall customer experience.

In the UAE, the Central Bank of the UAE (CBUAE) has recently introduced the Payment Token Services Regulation (PTSR), which imposes specific requirements on payments in virtual assets. This article discusses the impact of this regulation on merchant payments and its potential to shape the virtual asset industry in the region.

Risks with unregulated Crypto Merchant Payments

Many solutions globally have operated in a legally grey area, where fiat-to-virtual asset conversions were facilitated by both regulated and unregulated liquidity providers, posing risks particularly related to AML practices. Accepting crypto payments without stringent AML/KYC checks, including wallet screenings, could facilitate money laundering by integrating illicit funds into the traditional financial system. This highlights the importance of comprehensive AML measures to prevent illegal activities and ensure the integrity of the financial system. This can only be accomplished through regulation of all players invovled.

Position under PTSR

The new PTSR clarifies the legal framework for crypto payments in the UAE. Contrary to some beliefs, PTSR does not ban crypto payments but regulates them.

The PTSR stipulates that merchants can only accept payments for goods and services in dirham-backed stablecoins.

While many have interpreted this to mean an outright ban on crypto payments, there is no express prohibition on licensed Virtual Asset Service Provider (VASP) first converting virtual assets to fiat or dirham backed stablecoins.  

The conversion of virtual assets into fiat or dirham-backed tokens through VARA or SCA -regulated VASPs is still permissible provided the appropriate no-objection registrations and licenses are procured from the CBUAE.

Implications on Existing Merchant Acquirers and Payment Aggregators

Merchant acquirers and payment aggregators in the UAE, regulated under the Retail Payment Services and Card Schemes Regulation (RPSCS Regulation), enable merchants to accept payments through various methods including debit cards, credit cards, and bank transfers. The PTSR though supersedes references to virtual assets in the RPSCS Regulation. Merchant acquirers and aggregators regulated under RPSCS Regulation can seek a custody and transfer license under PTSR for settlements in dirham-backed stablecoins, or a conversion license for facilitating fiat-to-stablecoin exchanges. If they wish to only handle the fiat leg of the transaction, they may continue under their existing license.

To enable trading of virtual assets – fiat/dirham backed stablecoins pairs, partnerships with VARA based VASPs can be explored. Such partnerships would involve front-end integrations to allow paying customers to acquire fiat/ dirham backed stablecoins for payment to merchants. All players must ensure that they operate within their licensing scopes for such arrangements.

Similar models can be seen in other jurisdictions, where the conversion of cryptocurrencies to fiat is handled by licensed VASP, and the fiat leg of the transaction is managed by payment service providers (PSPs), often operating in distinct regulatory environments.

Depending on the structure of the solution offered, contractual relationships will exist between (i) VASPs-paying customers for trading of crypto to fiat/dirham backed stablecoin; (ii) PSPs and merchants for acceptance and settlement of payments; and (iii) between PSPs and VASPs for front-end integration.  

These partnerships benefit all parties: customers enjoy flexible payment options, merchants expand their payment methods, and payment service providers and VASPs gain an additional revenue channel.

Implications for Merchants

Merchants should seek comprehensive solutions for seamless crypto payments. These solutions streamline payment processes and enhance customer satisfaction by providing more payment options. Additionally, adopting crypto payments can position merchants as forward-thinking and tech-savvy, attracting a broader audience and potentially increasing sales.

However, in the absence of such licensed solutions in the market currently, some platform structuring may have to be undertaken for quick go-to-market.

Conclusion

While the full impact of the PTSR on payments and the virtual asset market in the UAE is yet to unfold, this regulation marks a progressive step. It offers legal clarity, fosters trust among customers, and ensures regulatory compliance, mitigating AML risks. This novel approach is likely to positively influence the perception and adoption of virtual asset payments in the region, enhancing overall market confidence.

By: Srijith K N, Senior Editor

In the early 2010s, Bitcoin was the only cryptocurrency in the market. Today, blockchain—the technology behind cryptocurrencies—has given rise to a myriad of digital currencies like Ethereum, Solana, Tether, XRP, Binance Coin (BNB), USD Coin (USDC), and Cardano, which are now household names. According to CoinMarketCap, there are approximately 22,932 cryptocurrencies with a total market capitalization of $1.1 trillion. Among these, around 10,000 are actively used and trusted by users. The global cryptocurrency market cap today stands at $2.18 trillion, with a wave of cryptocurrencies built on decentralized peer networks, which have become the de facto standard for cryptos.

A Decade of Exponential Growth

By the end of 2013, there were over 50 different cryptocurrencies. By the end of 2014, this number had increased nearly tenfold to over 500. A decade ago, the crypto market was barely worth $10 million. According to Wikipedia, there are 18 countries in the Middle East. In this context, this THE RISE OF CRYPTOS article will primarily discuss cryptocurrency activity in the UAE, Saudi Arabia, Egypt, Morocco, Algeria, and Jordan.

MENA: A Growing Hub for Cryptocurrency

Another report by Chainalysis indicates that the MENA region is one of the fastest-growing cryptocurrency markets in the world, with a significant increase in the volume of cryptocurrency transactions, particularly in the United Arab Emirates (UAE), Saudi Arabia, and Egypt.

Today, we stand on the cusp of a technological revolution in finance. Bitcoin and blockchain have transcended conventional dimensions of financial transactions, contributing to economic welfare. This momentum has ignited a wave of innovation across nations. In the UAE, Dubai has established the Virtual Asset Regulatory Authority to oversee the crypto market, and the Central Bank is working toward launching a Central Bank Digital Currency (CBDC). There is a clear intent to position the country as a global crypto hub in the coming years

By Peter Bahorecz, Partner And Chief, Networking Officer, SunMoney

In today’s rapidly evolving financial world, where innovation is constantly pushing the boundaries, the intersection of renewable energy and blockchain technology has produced something truly remarkable: renewable energy-backed tokens. These tokens are not simply another addition to the list of digital tokens; they represent a manner for reconciling sustainability with contemporary finance, giving you an elegant and also stable asset class to invest in — no matter if you’re a seasoned investor or possibly new-to-investing. However, like any financial instrument that has withstood the test of time, their success depends on three key elements: security, transparency, and trust.

Security: The Unshakable Pillar of Renewable Energy-Backed Tokens

Security isn’t just a feature—it’s the bedrock of any credible digital asset. SDBN tokens are seamlessly blending avant-garde digitized assets and the power of the sun. The SDBN token is designed to be a bridge between traditional investments and the dynamic world of crypto, offering a level of built-in security that sets it apart from other digital assets. These tokens, specifically, backed by SunMoney Sonal Group’s solar power plants are not some abstract investment similar to shares; their value is supported by real-life, sustainable, and profitable on-power renewable energy generation. The smart contracts governing SDBN tokens are thoroughly audited to maintain the highest standards of security and reliability. In the complex regulatory environment of Dubai, where token issuance is governed by the Virtual Assets Regulatory Authority (VARA), compliance partner, VAF Compliance plays a crucial role by guiding UAE-based entities, like SDBN, through the intricacies of token issuance and ensuring compliance with VARA regulations. By providing expert assistance in the preparation and refinement of whitepapers, they act as a strategic partner, managing the regulatory relationship, and helping in navigating the compliance landscape with confidence, ensuring innovative financial products like the SDBN tokens meet all necessary legal standards. Continuous monitoring of VARA and MICA regulation changes further ensures that SDBN tokens remain compliant with the latest industry standards, providing peace of mind for all investors.

At the heart of this security is a rigorous Know Your Customer (KYC) process, ensuring that tokens do not end up in the wrong hands. Customers undergo a comprehensive KYC, which includes PEP and blacklist checks, eliminating the risks of supporting illicit activities such as terrorism, human trafficking, and money laundering. Moreover, security elements are embedded in the smart contracts to protect investors—particularly those new to the crypto space—from losing their tokens to fraud or technical mishaps. And if an investor loses access to their tokens, SDBN has the capability to replace the lost tokens and burn the originals, ensuring the investor’s assets remain secure.

Transparency: The Lifeblood of Trust in Asset-Backed Green Cryptocurrency Tokens
For asset-backed renewable energy tokens, transparency is crucial to building and sustaining investor trust. Without it, even the most innovative financial products can struggle to gain traction. These asset-backed tokens are built off the blockchain technology, providing a level of standard transparency which conventional financial systems can never do. All transactions are recorded on a public ledger, and it is open to view or validate by everyone. Moreover, blockchain technology makes it even more secure by providing a decentralized, immutable ledger that makes fraud nearly impossible and ownership crystal clear. It does not just add a feature, but opens an interesting possibility for investors to look at their money and investments. By combining tangible assets with the transparency and security of blockchain, SDBN tokens stand out as a smart, secure choice in the evolving digital finance landscape.
Transparency in renewable energy-backed tokens extends beyond blockchain, by providing regular updates and performance reports filled with deep drills into investments. Instead of investing and crossing their fingers behind the scenes, investors in this case are given details on the solar power plants that back their investments, showing performance metrics from energy production all down to financial returns. SunMoney Solar Group has implemented global compliance measures, including quarterly health checks by an external compliance company, to ensure legal adherence and Anti-Money Laundering (AML) protocols are strictly followed. This sort of information and transparency allows the investors to make well-informed decisions and increases their confidence with regard to the security and worthiness of their tokens. Moreover, our bottom-up approach to governance reflects our commitment to transparency. Investors are kept informed about key decisions and developments, ensuring they have a stake in the future of their investments. This isn’t just about appeasing investors; it’s about fostering a community of engaged stakeholders who are directly involved in the success of the project.

User Adoption: Unlocking the Potential of Asset-Backed Renewable Energy Tokens
As such, while a discussion of what such tokens are and what they might mean is all well and good, asset-backed green cryptocurrency tokens will never realize their full potential unless they are also intuitive, accessible, and widely embraced. SunMoney Solar Group has tackled this challenge by designing a platform that’s as user-friendly as it is sophisticated. Whether you’re a seasoned investor or dipping your toes into digital assets for the first time, the SDBN platform makes investing straightforward and understandable. It is not just an aesthetic design but a means of eliminating barriers to entry, making it accessible to more people in the investment world — especially those who have been neglected by conventional financial infrastructures. These tokens are made even more attractive by further partnerships with established financial institutions, as they add layers of credence and credibility. Meanwhile, efforts to foster a vibrant investor community ensure that users are not navigating this space alone. Instead, they are part of a supportive network where they can share insights, ask questions, and grow together.

The Strategic Impact of Asset-Backed Green Cryptocurrency Tokens
The organic growth of the renewable energy industry is readily apparent as companies realize the strategic advantage offered by asset-backed renewable energy tokens such as SDBN. These are not ordinary investment vehicles: they differentiate themselves via the underlying policy used to generate financial return, which intertwines combined sustainability principles with profits. Each SDBN token is backed by a portion of an operational solar power plant, making it fully collateralized and measurable. This is not about trading the highs and lows of cryptocurrency, it’s about delivering an ironclad business model that earns investors a decent yield from clean power generation every day. When markets are prone to fluctuations, this type of down-to-earth investment is very attractive. SunMoney Solar Group is quite forward-thinking and intelligent in the use of these tokens. By linking the value of the tokens to real-world assets, a financial product that appeals to a very wide audience is created, from hardcore crypto investors to cautious and conscious ones seeking stable and sustainable options. The regular, stable returns offered by these tokens make SDBN an attractive choice for those who want to invest not just in financial growth, but in the future of our planet.