UAE Restricts Domestic Payments to AED-Pegged Stablecoins as Gulf Rivals Race for Payment Rails

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UAE bars algorithmic and privacy stablecoins from domestic payments; only AED-pegged tokens qualify ahead of a September 2026 licensing deadline.

The CBUAE's Payment Token Services Regulation permits only CBUAE-licensed, AED-pegged tokens for domestic retail payments.
Algorithmic stablecoins and privacy tokens are barred from payment use under Circular No. 2 of 2024.
AE Coin, live since October 2024, and Zand AED, approved in November 2025, are the first regulated dirham stablecoins in the market.
RAKBank and the institutional DDSC token have since added two more CBUAE-approved AED stablecoins to the list.
Federal Decree-Law No. 6 of 2025 gives every virtual asset service provider until 16 September 2026 to secure a CBUAE licence.
Saudi Arabia, Bahrain and Qatar are each taking a different regulatory path, leaving the UAE with the Gulf's most developed stablecoin payment rails.

The Payment Token Services Regulation Sets the Rules for Digital AED Payments

A comparative analysis from Spark.money maps out how the Central Bank of the UAE (CBUAE) has drawn a firm line around which digital tokens can settle a payment inside the country. Under the CBUAE's Payment Token Services Regulation, only licensed, dirham-pegged stablecoins qualify for domestic retail payments, while algorithmic models and privacy-focused tokens are excluded outright.

The rule sits alongside a tighter deadline. Federal Decree-Law No. 6 of 2025 places every virtual asset service provider (VASP) operating in or targeting the UAE under CBUAE supervision, with a transitional compliance window that closes on 16 September 2026. Together, the two measures define which digital rails are compliant for AED settlement and which counterparties FX and money-transfer firms can safely deal with.

What the Payment Token Services Regulation Permits and Bans

The CBUAE issued the Payment Token Services Regulation as Circular No. 2 of 2024, effective from late August 2024. It defines Payment Token Services as three activities: issuing a payment token, converting it to or from fiat currency, and providing custody or transfer services. A payment token must be fiat-referenced, backed by high-quality liquid assets in the same currency, and redeemable at par on demand, a definition narrow enough to exclude algorithmic and undercollateralised models.

Article 1 of the regulation states that no person may perform a payment token service in the UAE without a CBUAE licence or registration. An anti-avoidance clause extends this to any equivalent service, even where the token involved is not formally classified as a payment token. Algorithmic stablecoins and privacy tokens, defined as tokens that obscure a holder's identity or transaction history, cannot be issued, promoted or serviced for payment use under any circumstances.

AED-denominated Dirham Payment Tokens can only be issued by CBUAE-licensed entities incorporated onshore, with issuers holding at least AED 15 million in capital plus a reserve buffer worth 0.5 per cent of tokens in circulation. Foreign-currency tokens follow a lighter, registration-based route instead, available once VARA or the CMA has issued a non-objection.

Five Regulated Dirham and Foreign Payment Tokens

AE Coin became the first regulated AED stablecoin, issued by AED Stablecoin LLC and backed by Al Maryah Community Bank, after receiving in-principle CBUAE approval in October 2024 and launching later that year. Each coin holds a strict one-to-one dirham peg, and Mbank materials describe UAE federal government authorities as accepting it for certain services, alongside a taxi-payment pilot run with Tawasul Transport.

Zand Bank's subsidiary Zand Trust followed with CBUAE approval on 17 November 2025 for Zand AED, the UAE's first regulated, multichain dirham stablecoin available on public blockchains. RAKBank then became the first conventional bank to win in-principle approval for its own AED token in early 2026. The DDSC stablecoin, built by IHC, Sirius International Holding and First Abu Dhabi Bank on the ADI Chain, secured CBUAE approval on 11 February 2026 for institutional settlement and trade finance.

Token	Issuer	Status and Date	Primary Use
AE Coin	AED Stablecoin LLC, backed by Al Maryah Community Bank	Approved October 2024, live	Retail and government payments
Zand AED	Zand Trust, a subsidiary of Zand Bank PJSC	Approved November 2025, live	Multichain public blockchain settlement
RAKBank AED token	RAKBank	In-principle approval, early 2026	Bank-linked retail payments
DDSC	IHC, Sirius International Holding and First Abu Dhabi Bank	Approved February 2026	Institutional settlement and trade finance
USDU (foreign token)	Universal Digital, ADGM-regulated	Registered January 2026	USD-linked settlement and AED-USD conversion

The September 2026 Licensing Deadline Under Federal Decree-Law No. 6 of 2025

Federal Decree-Law No. 6 of 2025 took effect on 16 September 2025, replacing the UAE's prior central bank law and pulling decentralised finance protocols, stablecoin issuers, exchanges and other Web3 platforms under direct CBUAE oversight. Article 62 extends the licensing requirement to anyone who carries on, offers, issues or facilitates a licensed financial activity, regardless of the technology or form used. Firms have one year, until 16 September 2026, to secure a licence under the UAE's wider crypto licensing regime or exit the market.

The new law layers onto other 2025 reforms. Federal Decree-Law No. 10 of 2025 replaced the AML law in October, and Cabinet Decision No. 134 of 2025 updated its executive regulations in December, both bringing virtual asset service providers explicitly into scope for anti-money laundering checks. Separately, Federal Decree-Laws No. 32 and 33 of 2025 reconstituted the Securities and Commodities Authority as the CMA from 1 January 2026, adding virtual assets to its federal mandate outside the financial free zones.

Firms that assessed their position before the law changed should not assume that earlier analysis still holds. Isabella Chase, head of policy for EMEA at blockchain analytics firm TRM Labs, has said regulators can no longer rely on approved-token lists to keep pace with innovation. That shift pushes the burden of policing individual tokens back onto licensed firms themselves.

How the UAE Compares With Gulf Rivals Building Stablecoin Rails

Saudi Arabia has taken the most cautious path among its Gulf neighbours. The Saudi Central Bank bars financial institutions from crypto trading and has issued no stablecoin-specific rulebook, preferring central bank digital currency pilots and cross-border projects with China and BRICS+ partners instead. Bahrain sits between the two extremes: its central bank classifies crypto assets as securities and introduced a dedicated Stablecoin Issuance and Offering Module in July 2025, though its market remains small by regional standards.

Qatar has focused on tokenisation rather than payments. Its Qatar Financial Centre Digital Assets Framework, effective from September 2024, gives legal recognition to tokenised assets and smart contracts but stops short of a dedicated stablecoin regime. Kuwait continues to prohibit crypto trading outright, and Oman's virtual asset framework remains provisional, leaving the UAE as the only Gulf state with multiple regulated dirham stablecoins already in circulation.

Jurisdiction	Regulatory Posture	Stablecoin Framework
UAE	Regulation-first, adoption-friendly	Payment Token Services Regulation, 2024; five approved or registered payment tokens
Saudi Arabia	Cautious, CBDC-focused	No dedicated stablecoin rules; crypto trading barred for banks
Bahrain	Regulation-first, securities-style	Stablecoin Issuance and Offering Module, July 2025
Qatar	Tokenisation-focused	QFC Digital Assets Framework, September 2024; no stablecoin-specific regime
Kuwait and Oman	Restrictive or provisional	No dedicated stablecoin framework

What This Means for FX Brokers and Money-Transfer Businesses

For FX and money-transfer firms, Article 62's technology-neutral wording is the detail to watch. Any business that creates, redeems, custodies or converts AED-linked tokens as part of a remittance or FX service is likely performing a payment token service and needs a CBUAE licence or registration. Banks and payment firms that already hold a CBUAE stored value and retail payment licence can often access a lighter non-objection route for conversion activity, but new entrants face the regulation's full licensing process.

Firms that currently settle AED-linked flows using unregistered dollar stablecoins should treat this as a compliance gap, not a technicality. Only CBUAE-approved dirham tokens, or registered foreign tokens such as USDU, may lawfully function as a means of payment inside the UAE. Treasury and FX desks weighing blockchain-based settlement now have a defined, if narrow, shortlist to choose from, and the September 2026 deadline leaves limited time to migrate any non-compliant corridor onto it.

What Clients are Asking their Advisors

Which stablecoins can be used to pay for things in the UAE?

Only CBUAE-licensed, dirham-pegged payment tokens or registered foreign payment tokens can lawfully settle a domestic payment. AE Coin, Zand AED and the CBUAE-approved DDSC stablecoin are current examples, alongside the USD-pegged USDU for cross-border legs.

What happens if a crypto firm misses the UAE's September 2026 deadline?

Firms that fail to secure a CBUAE licence or registration under Federal Decree-Law No. 6 of 2025 by 16 September 2026 risk administrative sanctions and forced closure of in-scope services. Continuing to facilitate AED-linked payments without authorisation after that date carries real regulatory risk.

Why does the UAE ban algorithmic stablecoins and privacy tokens?

Algorithmic tokens maintain their peg through code rather than reserves, which falls outside the CBUAE's definition of a payment token and raises the stability risks seen in past global collapses. Privacy tokens obscure transaction details, which conflicts with anti-money laundering rules applied to anything used as money.

How does the UAE's stablecoin regime compare with Saudi Arabia, Bahrain and Qatar?

The UAE is the only Gulf state with multiple regulated dirham stablecoins already circulating. Saudi Arabia bars banks from crypto trading and favours central bank digital currency projects, Bahrain has introduced a narrower stablecoin module, and Qatar's framework focuses on tokenisation rather than payment tokens.