Bank of UAE

In a press release issued yesterday on the 3rd of November 2020, the UAE Central Bank announced issuing of a new updated regulation on Stored Value Facilities (SVF). Stored Value Facilities (e-wallets, top-up cards, and gift cards, etc.) are channels that help users to store money digitally and make digital payments or transactions.  The new regulation was rolled out to enhance security and boost the country’s digital payment services.

The UAE Central Bank first introduced a regulatory framework for the Stored Values and Electronic Payment Systems back in the year 2017. Thereafter, on Tuesday 3rd November 2020 new rules and regulations were rolled out expecting the firms to comply with the updated norms, a year from now.

The new Regulation on SVF introduced will ensure efficiency and secured digital payment operations. The UAE’s Banking Regulators claim that the initiative will facilitate Fintech firms and Non-Bank Payment Service Providers’ easy access to the UAE market and also ensure the security of customer’s funds. The regulation will also ensure an appropriate business code of conduct and support the development of digital payment products and services. 

The SVF Regulation calls for licensing, supervision, and enforcement provisions on companies who are licensed to provide SVF. As stated earlier the regulation will come into force a year from now while firms already holding an SVF license that was granted earlier, under the previous regulatory framework shall continue operating. But, they too shall be expected to comply with the new requirements and implement relevant measures by the end of the transition phase which is within a year. 

The UAE’s Central Bank Governor’s take on the updated Regulation  

H.E. Abdulhamid M. Saeed Alahmadi, the Governor of the Central Bank of the UAE was quoted saying that the new SVF Regulation will strengthen the public’s confidence in the use of digital products and services and foster development and innovation across the payments industry. He further quoted that the new regulation is a significant milestone in the development of a robust Regulatory Framework of Stored Value Facilities and the Digital Payments Industry. This regulation will ensure a level playing field for market participants that will help maintain the UAE’s status as an International Financial Centre and a leading Payment Hub.

Implications of the Regulation on Digital payment& Cryptocurrency Industry

Introducing and further updating SVF Regulation will go a long way in securing the stability and integrity of the financial system, payment infrastructure, and development of digital payments in the UAE. The measures are taken to ensure the security of digital payment which also has a direct impact on Cryptocurrency and Digital currency holders. With this landmark regulation, users can now actually store the digital currencies in their own digital wallets or with custodians. It will further facilitate holders to use these digital currencies for making payments, P2P lending, remittances, and such other similar digital payment transactions.

The announcement of the updated Regulation comes soon after the UAE Securities and Commodities Authority approved the legislation on Crypto Assets. This clearly shows the efforts taken by the UAE Central Bank in line with the digital currency regulation and SCA UAE’s Crypto Assets Regulation to enhance the Crypto Currency, Digital Assets, and BlockChain ecosystem in the country.

Final Thought

Acceleration in the trend of opting for digital payments by consumers in the UAE has pushed regulators to build a robust strategy in securing Digital payment channels. With the increasing use of digital payments in the UAE, the mobile wallet market is expected to reach $2.3 billion by 2022, (according to a report by US-based TechSci Research). So, as the use of Digital Payments begins to gain momentum, the regulators too are on a roll to level up their game in context to regulating, securing, and facilitating easy digital payment services to consumers.

Narendra Sahoo
Narendra Sahoo

Narendra Sahoo (PCI QSA, PCI QPA, CISSP, CISA, and CRISC) is the Founder and Director of VISTA InfoSec, a global Information Security Consulting firm, based in the US, Singapore & India. Mr. Sahoo holds more than 25 years of experience in the IT Industry, with expertise in Information Risk Consulting, Assessment, & Compliance services. VISTA InfoSec specializes in Information Security audit, consulting and certification services which include GDPR, HIPAA, CCPA, NESA, MAS-TRM, PCI DSS Compliance & Audit, PCI PIN, SOC2 Compliance & Audit, PDPA, PDPB to name a few. The company has for years (since 2004) worked with organizations across the globe to address the Regulatory and Information Security challenges in their industry. VISTA InfoSec has been instrumental in helping top multinational companies achieve compliance and secure their IT infrastructure.