How are stablecoins regulated in the UAE? CBUAE payment tokens vs VARA explained

In the UAE, the Central Bank (CBUAE) regulates stablecoins used as a means of payment through its Payment Token Services Regulation (Circular 2/2024), and it alone regulates tokens pegged to the dirham. A merchant selling goods or services in the UAE may accept a virtual asset as payment only if it is a dirham payment token from a CBUAE-licensed issuer; foreign-currency tokens from registered foreign issuers can be used only to buy virtual assets. In Dubai, VARA approves fiat-referenced virtual assets (FRVAs), but they may be used only within the virtual asset market, not to pay for goods or services.

Status checked on 4 November 2026. Primary source: CBUAE Rulebook: Payment Token Services Regulation.

What does the CBUAE Payment Token Services Regulation cover?

The regulation defines three payment token services: issuing, conversion, and custody and transfer. The CBUAE rulebook shows it in force, with its articles dated effective 31 August 2024; law-firm summaries give other issue and effective dates, so rely on the rulebook.

Its key definitions set the boundaries. A Dirham Payment Token is denominated in AED, or tied to another AED-denominated token, and issued by a licensed Dirham Payment Token Issuer, which may issue only to UAE residents. A person not incorporated and located in the UAE, including one in a financial free zone, may apply for Foreign Payment Token Issuer Registration instead. CBUAE Rulebook: Article 1, definitions

Dirham payment tokens vs foreign payment tokens: what is the difference?

The acceptance rule sits in Article 2, which limits what merchants may take as payment. CBUAE Rulebook: Article 2, prohibitions Article 12 sets the currency rules, bars an issuer from paying interest or any other benefit tied to how long a customer holds the token, and lets the CBUAE cap the volume or value of tokens or limit onboarding of new customers. CBUAE Rulebook: Article 12, restrictions

What must a licensed dirham token issuer hold?

The regulation reads like an e-money regime with tighter reserve rules:

• Capital. AED 15 million initial and ongoing capital, plus additional ongoing capital of at least 0.5% of the face value of outstanding tokens, or 2% for an issuer using the alternative reserve arrangement in Article 22(3). CBUAE Rulebook: Article 13
• Reserve. Cash in a separate escrow account in the token's currency, in the issuer's name, at a UAE-licensed bank outside its group, designated as a reserve safeguarding account. The reserve must at least equal the face value of tokens in circulation, and customers must have a legal claim on it if the issuer fails. CBUAE Rulebook: Article 22
• Redemption. At par in fiat, at any time, generally by the same time on the next business day unless the CBUAE allows otherwise, with fees only where they are proportionate to actual costs. CBUAE Rulebook: Article 21
• Small-issuer exemption. The CBUAE may exempt an issuer whose reserve would not exceed AED 500,000 and whose tokenholders number no more than 100.

Conversion and custody providers have separate, lower capital requirements scaled to monthly transfer volume. CBUAE Rulebook: Article 14

The first token licensed under this regime was AE Coin, issued by AED Stablecoin LLC, which Gulf Business reported received its license in December 2024. Gulf Business: AE Coin approval

Which stablecoins are banned in the UAE?

Article 2 bans algorithmic stablecoins and privacy tokens. No person may issue them, or provide services relating to them, in the UAE or directed at persons in the UAE, and promoting them is also prohibited. The ban covers firms licensed by other UAE authorities too. An algorithmic stablecoin is one that targets a stable value by changing supply or demand; a privacy token hides its holder or transaction history by design.

Article 2 came with a one-year transition period, which law-firm commentary reports has ended. Pinsent Masons: payment token transition ends

Where does VARA fit, and what is an FRVA?

VARA regulates virtual assets in Dubai; its rulebook defines the Emirate to exclude the DIFC, which has its own regulator. VARA's Virtual Asset Issuance Rulebook treats issuing a fiat-referenced virtual asset as a Category 1 issuance, so the issuer needs a VARA license and approval for each FRVA. VARA: Virtual Asset Issuance Rulebook

Two limits matter for payment products:

• FRVAs approved under VARA's rules may be used only to buy and sell assets in the virtual asset ecosystem, and the definition excludes tokens issued as a means of payment for goods or services in the UAE.
• Any token pegged to the dirham stays under the sole and exclusive purview of the CBUAE, and VARA will not approve it.

VARA's rulebook has been revised several times, including issuance guidance dated 9 April 2026, so check the current version on VARA's rulebook site. For how VARA licensing shapes on-ramp design, see crypto on-ramps: a product guide.

How does Bahrain's stablecoin framework compare?

The Central Bank of Bahrain announced its framework on 4 July 2025, as a new Stablecoin Issuance and Offering (SIO) module in Volume 6 of its rulebook. Licensed issuers may issue single-currency stablecoins backed by the Bahraini dinar, the US dollar or another fiat currency the CBB accepts. CBB: stablecoin issuance framework The module text requires reserves worth at least 100% of the par value in circulation, legally separated from the issuer's own assets. CBB: SIO module That PDF is dated October 2024, so check the current rulebook version before relying on paragraph detail.

What else changed in UAE law, and what should teams check?

Federal Decree-Law No. 6 of 2025, the new Central Bank law, took effect in September 2025. Law-firm summaries say it gave affected firms a one-year window to regularize their position, ending in mid-September 2026, which the CBUAE may extend. Hadef & Partners: new Central Bank law Check with the CBUAE whether it has done so.

A short checklist for a payment or wallet product:

1. Map every flow to a token type. Paying a UAE merchant needs a licensed dirham token; a US dollar token's permitted payment use onshore is buying virtual assets.
2. Check the issuer's status in the rulebook, not in a press release: licensed, registered or neither.
3. Treat conversion and custody as licensed services under the regulation, with their own capital; crypto off-ramps in emerging markets covers the payout side.
4. Plan the reserve bank. An escrow account at a UAE bank outside your group is a partner decision, much like the float questions in Checkout.com's UAE SVF approval.
5. Build controls before launch. The CBUAE's thematic review expects stronger controls from payment-token providers; see CBUAE makes payment controls a launch gate.

For the US comparison, see what the GENIUS Act requires.

FAQ

Is there a regulated dirham stablecoin?

Yes. Only a CBUAE-licensed issuer may issue a Dirham Payment Token, and AE Coin was reported licensed in December 2024. Check the CBUAE's current list for others.

Can I pay a UAE merchant in a US dollar stablecoin?

Not under the CBUAE rules. A merchant selling goods or services in the UAE may accept only a dirham payment token from a licensed issuer; registered foreign tokens are limited to buying virtual assets.

Who regulates stablecoins in Dubai?

The CBUAE regulates payment tokens and every dirham-pegged token. VARA approves fiat-referenced virtual assets in Dubai outside the DIFC, which has its own regulator.

How much capital does a UAE dirham token issuer need?

AED 15 million, plus at least 0.5% of the face value of outstanding tokens, or 2% under the alternative reserve arrangement in Article 22(3).

Are algorithmic stablecoins allowed in the UAE?

No. Article 2 of the Payment Token Services Regulation bans issuing, servicing or promoting algorithmic stablecoins and privacy tokens in or directed at the UAE.