Stablecoins in the UAE: From Policy Vision to Practical Use

The United Arab Emirates (UAE) has rapidly established itself as one of the world’s leading hubs for digital assets, and its approach to stablecoins is a case in point. This forward-looking jurisdiction has quietly been putting the building blocks in place for years, creating a regulatory and market environment that is now attracting global players, fostering innovation and unlocking real-world use cases

A Long-Term Play, not a Sudden Success

Stablecoins may feel like the hottest new topic of 2025, but the UAE’s journey started much earlier – and well before the passage of the GENIUS Act in the US was even conceived. As early as 2017-18, regulators such as Abu Dhabi’s Financial Services Regulatory Authority (FSRA) and Dubai’s Virtual Assets Regulatory Authority (VARA) were studying the industry with care and developing thoughtful frameworks for virtual assets.

In June 2024, the UAE’s central bank issued its Payment Token Services Regulation to oversee stablecoins, and the FSRA concurrently approved the issuance of stablecoins by licensed entities, such as Paxos, under its regulatory framework. This policy step positioned stablecoins not as a speculative asset but as part of the country’s long-term strategy to diversify its economy beyond oil, in line with UAE Vision 2031.  

A Natural Home for Stablecoins

Several structural features make the UAE particularly well-suited to benefit from stablecoins. First, the country’s demographics: with almost 90% of the population being expatriates, the UAE is one of the world’s largest remittance hubs. Billions of dollars flow out each year to destinations such as India, Pakistan, the Philippines and beyond.

Stablecoins offer a more efficient, lower-cost way to send money home. By reducing reliance on correspondent banks and eliminating FX spreads, they allow workers to remit funds instantly and securely.

The UAE is also a major commodities and trading hub. Stablecoins make it easier for firms to settle invoices across borders, manage liquidity and reduce counterparty risk in global supply chains. For businesses operating across Asia and Africa – regions with deep financial ties to the UAE – the ability to move value 24/7 is transformative.

Yield-Bearing Stablecoins: A UAE Differentiator

Perhaps the most striking policy innovation is that the UAE has explicitly allowed yield-bearing stablecoins under its regulatory framework. This stands in contrast to the US, where the recently passed GENIUS Act prohibits such instruments.

Under Abu Dhabi Global Market’s (ADGM) framework, fiat-referenced tokens can be backed by cash and securities, with mechanisms to distribute yield transparently. Crucially, this access is not limited to institutional investors – individuals can also hold these tokens and earn yield directly. Paxos’ USDL token, for example, operates under these rules. This broad accessibility gives both institutional and retail players confidence that they can participate in the market without legal uncertainty – and it positions the UAE as a global first mover.

Institutional Adoption on the Horizon

While remittances remain a key use case for retail customers, institutional adoption is the next frontier. Many corporates and financial institutions in the region hold large cash balances today. In the near future, it’s likely that a portion of those reserves will shift into stablecoins, unlocking 24/7 liquidity, faster settlement and new collateral management options.

Banks themselves stand to benefit too. Since stablecoins must be backed 1:1 by reserves, there is a growing opportunity for banks in the UAE to become trusted custodians of those assets – a role fully aligned with the Central Bank of the UAE’s regulatory framework for tokens – generate new revenue streams while providing credibility and safeguards.

The underlying infrastructure can also help banks to modernise. Traditional core banking systems often take years to adapt to new demands. By contrast, blockchain-based rails offer near-instant settlement and programmable features that can support new products and services within months, not years.

Ecosystems and Collaboration

The UAE’s success is not just regulatory, it’s also ecosystem-driven. The UAE’s role as a convening point for global finance means that local associations, Big Four consultancies like PwC, and sovereign-linked entities are all actively engaged in shaping the market. Reports and data from these groups are helping quantify adoption and highlight opportunities, from real estate tokenisation to commodities trade finance. PwC’s recent report highlights that in the year ending June 2024, the UAE received US$30bn in digital assets, making it the third-largest digital asset destination in the MENA region, following Turkey and Saudi Arabia. They point out that this trading volume creates ideal conditions for stablecoin growth, enabling financial institutions and VASPs to diversify their services.

At the same time, regional governments are looking at sovereign-led stablecoin initiatives as part of their broader economic diversification. As an example, three major UAE institutions – IHC, ADQ and First Abu Dhabi Bank (FAB) – have announced plans to launch a new stablecoin backed by Dirhams, which will be fully regulated by the Central Bank of the United Arab Emirates (CBUAE) and issued by the UAE’s largest bank, FAB (subject to regulatory approval). The goal of embracing digital financial infrastructure as a strategic pillar is clear.

From the UAE to the World

The UAE is not just focused inward. As its stablecoin policies and market activity contribute to shaping trade corridors across Asia and Africa, the country’s role as a global financial hub is reinforced. With 24/7 liquidity, reduced settlement risk, and interoperability with tokenised assets, stablecoins are becoming part of the toolkit for cross-border commerce.

Notably, while Central Bank Digital Currencies (CBDCs) remain a topic of experimentation elsewhere, in the UAE the focus has shifted toward private stablecoins as the practical solution. The comfort with private-sector issuance reflects confidence in the regulatory frameworks that have been built and a pragmatic approach to driving adoption.

Walking the Talk

The UAE’s approach to stablecoins offers a powerful lesson for policymakers worldwide. By combining clear regulation, industry collaboration and a focus on real-world use cases, the country has created fertile ground for innovation while ensuring stability.

In practice, stablecoins are already solving problems – from remittances for migrant workers to liquidity management for global trading firms. With yield-bearing products, institutional adoption and cross-border corridors on the horizon, the UAE is positioning itself not just as a regional leader but as a global standard-setter in the future of money.