UAE stablecoin rules are now quickly changing how you pay, bank everyday

Dubai: The UAE has rolled out one of the Gulf’s most comprehensive regulatory frameworks for stablecoins, formally embedding digital tokens into its financial system.

The Payment Token Services Regulation applies to any dirham-backed stablecoin used for domestic payments. S&P Global Ratings said “the PTSR aims to combine the traditional banking system with the digital asset ecosystem.”

The rules took effect on August 31, 2024, setting conditions for how payment tokens can operate in the country. The report says “the PTSR governs the issuance, conversion, custody, and transfer of stablecoins within the UAE.” It adds that stablecoins used locally must be issued by licensed entities under ongoing supervision.

The framework places strict controls on how stablecoins are backed. It “requires the segregation of reserve assets from the stablecoin issuer’s other assets and a monthly audit by an external auditor.” Issuers must also hold “at least Dh15 million in initial capital, plus additional capital” linked to tokens in circulation.

The regulation draws firm boundaries around what stablecoins can and cannot do. It “prohibits paying interest or any other benefits related to the length of time a payment token is held” and “bans algorithmic stablecoins.” It also restricts foreign payment tokens, which “cannot be used to buy goods (excluding virtual assets) and services locally.”

Licensed dirham stablecoins are already entering the market. In December 2024, the central bank approved AE Coin as the UAE’s first fully licensed dirham-backed stablecoin. As of January 2026, AE Coin had been integrated into Network International’s point-of-sale and e-commerce systems, allowing merchants across the UAE to accept it.

Banks are now positioning themselves inside the emerging ecosystem. First Abu Dhabi Bank, ADQ, and International Holding Company announced plans in April 2025 to issue a regulated stablecoin. Digital bank Zand launched “Zand AE” in November 2025, followed by RAKBANK securing initial approval in January 2026.

S&P said the framework opens multiple commercial paths for lenders. “Through their licensed subsidiaries, banks can participate in stablecoin ecosystems as issuers, custodians, transfer agents, or conversion providers.” It said this would allow banks “to capture opportunities related to stablecoin innovation.”

The report said the structure also reshapes how funding risks are managed. “The potential displacement of deposits is partially offset by the requirement for stablecoin issuers to hold reserves with banks.” It cautioned this “could exacerbate deposit concentration risk.”

S&P said stablecoins are unlikely to function as substitutes for savings accounts. “Since stablecoins are not allowed to pay interest, they are less attractive as saving instruments, which could limit adoption.” It added that it does “not view this as a systemic risk, yet.”

The ratings agency said payment revenues may face mild pressure as blockchain settlement expands. “Banks could lose a portion of the fees they currently charge for providing traditional payment services and money transfers.” It said this “could be offset by fees from new services, such as providing wallets or holding reserves for third-party issuers.”

On credit strength, S&P struck a steady tone. “We currently do not expect this to affect UAE banks’ business or financial profiles meaningfully.” It added, “we also believe that the regulators will aim to maintain the stability of the banking system.”

S&P said the UAE stands among the most advanced stablecoin jurisdictions in the Gulf. Bahrain allows stablecoins linked to several fiat currencies, while Saudi Arabia and Oman are still building formal frameworks. Qatar and Kuwait remain more restrictive toward crypto and stablecoin activity.

Globally, S&P said the UAE approach mirrors leading international regimes. “Under all these regulations, stablecoins are fully backed by reserves, assets are kept separate from other funds, issuers are licensed, and strong supervision is in place.” For UAE businesses and residents, that structure is now translating into regulated digital dirhams entering everyday payments.