The United Arab Emirates (UAE) has rapidly positioned itself at the forefront of digital asset regulation, introducing a comprehensive legal regime for stablecoins that is now among the world’s most sophisticated. As of November 2025, the regulatory landscape is shaped by two pivotal instruments: the Payment Token Services Regulation (PTSR) and Federal Decree Law No. 6 of 2025. Together, these frameworks bring clarity to licensing, compliance, and central bank oversight for all entities operating in the stablecoin space.
Licensing Under the Payment Token Services Regulation (PTSR)
Effective August 2025, the PTSR requires any entity involved in issuing, converting, transferring, or safeguarding stablecoins, termed “payment tokens”: to obtain direct authorization from the Central Bank of the UAE (CBUAE). The regulation is clear: only dirham-backed stablecoins issued by locally licensed entities can be used for payments within the UAE. This move not only cements monetary sovereignty but also sets a high bar for operational transparency and consumer protection.
Foreign-issued stablecoins are restricted to virtual asset transactions and explicitly barred from domestic payment use. The intent is to prevent currency substitution risks and ensure that all digital payment activity aligns with CBUAE’s monetary policy objectives.
The licensing process involves rigorous due diligence on applicants’ governance structures, financial soundness, IT security protocols, and ongoing compliance capabilities. Entities must demonstrate robust internal controls and risk management frameworks before receiving approval.
Central Bank Oversight Expands: Federal Decree Law No. 6
On September 16th, 2025, Federal Decree Law No. 6 came into effect, an inflection point for digital finance in the region. This landmark legislation brings not only centralized crypto players but also decentralized finance (DeFi) platforms and Web3 activities under direct CBUAE supervision. The law mandates licensing for a broad range of activities including payments, exchanges, custody services, lending platforms, and investment vehicles leveraging stablecoins or other virtual assets.
Entities have until September 2026 to achieve full compliance or face penalties that can reach AED 1 billion (approximately $272 million), plus potential criminal liability for severe breaches. This signals a zero-tolerance approach to unlicensed operations while providing a one-year window for industry adaptation.
Key Compliance Requirements: Reserve Backing and AML/CFT Controls
The new regime imposes stringent operational standards on all licensed stablecoin issuers:
- Full Reserve Requirement: Every stablecoin must be fully backed by high-quality liquid assets held in segregated accounts within UAE-domiciled financial institutions. Regular independent audits are mandatory to verify asset sufficiency and integrity.
- No Interest Incentives: Issuers are expressly prohibited from offering any interest or incentives tied to fiat-referenced virtual assets (FRVAs), reinforcing their role as payment instruments rather than speculative investments.
- AML/CFT Compliance: All market participants must implement advanced Know Your Customer (KYC) protocols and transaction monitoring systems in line with international anti-money laundering standards. Regulatory scrutiny extends to both onboarding procedures and ongoing surveillance of wallet activity.
This multi-layered approach aims to balance innovation with systemic risk mitigation, reflecting lessons learned from global stablecoin failures while maintaining an open door for responsible fintech development within the UAE’s borders.
Industry participants are responding with a mix of optimism and caution. On one hand, the regulatory clarity is seen as an enabler for institutional adoption and cross-border partnerships. On the other, the cost and complexity of licensing and compliance may prompt smaller or foreign operators to reconsider their UAE strategies. The explicit prohibition on interest-bearing stablecoins further distinguishes the UAE’s approach from some Western jurisdictions, signaling a conservative stance that prioritizes monetary stability over rapid innovation.
Transition Period and Enforcement Outlook
The one-year grace period, ending in September 2026, is pivotal for industry realignment. During this window, firms must complete licensing applications, upgrade compliance programs, and restructure product offerings to meet new standards. The Central Bank has indicated it will take a proactive supervisory role, conducting both scheduled and surprise audits to ensure adherence.
Enforcement mechanisms are robust: non-compliant entities face administrative fines up to AED 1 billion ($272 million), public censure, license revocation, or even criminal prosecution for egregious violations. This signals that while the UAE remains open to digital asset innovation, it will not tolerate regulatory arbitrage or shadow banking practices in its jurisdiction.
Strategic Implications for Market Participants
For global fintechs and crypto-native firms eyeing the Gulf region, these developments demand a recalibration of business models. Only dirham-backed stablecoins issued by licensed local entities can serve payment use cases, foreign stablecoins are relegated strictly to virtual asset trading. This both protects the dirham’s status as legal tender and channels digital finance activity through regulated pipelines.
Custodians, exchanges, DeFi protocols, and wallet providers must now operate with bank-grade controls around asset segregation, client verification, cybersecurity resilience, and transaction transparency. Firms that can demonstrate strong governance and compliance cultures may find themselves at a competitive advantage as institutional capital seeks safe access points into Middle Eastern markets.
Looking Ahead: The Role of Digital Dirham
The Central Bank’s ongoing development of a central bank digital currency (CBDC): the Digital Dirham, adds another layer of strategic complexity. While current regulations prioritize private sector innovation under strict oversight, the eventual launch of a state-backed CBDC could shift market dynamics further by offering an official digital payment rail integrated with public infrastructure.
This dual-track approach, fostering regulated private sector stablecoins while advancing sovereign digital currency development, positions the UAE as both an innovator and gatekeeper in global digital finance.
Ultimately, Federal Decree Law No. 6 of 2025 cements the UAE’s reputation as a leader in responsible crypto regulation. By setting clear rules around licensing, reserve management, AML/CFT controls, and monetary sovereignty, backed by credible enforcement, the country provides a blueprint that other regulators may soon follow as stablecoins become ever more integral to cross-border commerce.
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