How the Central Bank of the UAE Regulates USD-Denominated Stablecoins
The UAE has established a clear regulatory framework for the use of fiat-referenced stablecoins, anchored in the Central Bank of the UAE (CBUAE) Payment Token Services Regulation (PTSR). This framework defines how payment tokens - both domestic and foreign - may be used within the UAE financial system.
Rather than treating stablecoins as investment products, the PTSR regulates them based on function, with a specific focus on payment and settlement activity. This approach is intended to support innovation while maintaining regulatory clarity, financial stability, and appropriate supervisory oversight.
Within this framework, only foreign payment tokens that are issued by a Registered Foreign Payment Token Issuer may be lawfully used for certain USD-denominated settlement activities in the UAE, including settlement related to virtual asset trading; at the time of publication, USDU is the only USD-denominated stablecoin registered to support such activity.
The Central Bank Framework for USD-Denominated Stablecoins
Under the PTSR, the CBUAE distinguishes between:
- Dirham payment tokens, denominated in UAE dirhams (AED), and
- Foreign payment tokens, denominated in non-AED currencies such as USD.
USD-denominated stablecoins fall into the second category. Where such tokens are used within the UAE for payment or settlement purposes, they are expected to fall within the Central Bank’s regulatory perimeter, including formal registration and ongoing compliance obligations.
A core design principle of the framework is functional separation:
- Foreign-currency settlement is treated separately from
- Domestic AED payment activity.
This separation enables regulated digital settlement activity without blurring the boundaries of the UAE’s domestic payments system or monetary policy.
The VASP Circular: From Framework to Market Practice
In July 2025, these regulatory expectations were reinforced through a circular issued to UAE-licensed Virtual Asset Service Providers (VASPs).
The circular clarified that:
- VASPs engaging with fiat-referenced payment tokens are expected to align with the Payment Token Services Regulation;
- The transitional period for implementation is progressing toward completion; and
- Payment token compliance forms part of a coordinated supervisory approach across UAE regulators.
Taken together, this guidance translated the PTSR from a regulatory framework into practical expectations for how virtual asset trading and settlement should be structured in the UAE.
What This Means for Trading Virtual Assets and Derivatives
Within the scope of the PTSR, registered foreign payment tokens may be used in defined settlement contexts, including payment related to virtual assets and virtual asset derivatives.
In practical terms, where USD-denominated settlement is used for trading virtual assets or derivatives in the UAE, that settlement may take place either in fiat or via a foreign payment token that is registered under the PTSR.
This establishes a clear regulatory threshold:
USD settlement in these contexts must occur within the Central Bank’s regulatory perimeter.
Why This Matters for VASPs and Exchanges
For UAE-licensed trading platforms and market operators, the framework introduces an important operational consideration.
Where USD-denominated trading pairs or derivatives are offered, the settlement asset must align with the PTSR. This places registered foreign payment tokens at the centre of compliant USD settlement workflows, providing clarity for compliance teams and operational certainty for platform design.
Where USDU Fits
USDU is a USD-denominated stablecoin registered by the Central Bank of the UAE as a Foreign Payment Token. Universal Digital Intl Limited is registered as a Foreign Payment Token Issuer under the PTSR.
This registration confirms that USDU is recognised to operate within the UAE financial system for permitted USD settlement use cases, including settlement related to virtual asset and virtual asset derivative trading, under Central Bank oversight.
USDU is subject to defined governance, reserve backing, and disclosure requirements consistent with the Central Bank framework.
For UAE domestic settlements, USDU is structured to interoperate with AED-denominated payment tokens through compliant mechanisms—such as swaps into an AED stablecoin—ensuring that domestic payments remain aligned with UAE monetary policy and regulatory expectations.
Why This Matters
The Central Bank’s framework and subsequent supervisory guidance have brought clarity to how USD settlement can be conducted within the UAE’s digital asset markets.
They provide:
- A regulated pathway for USD settlement activity;
- Greater certainty for VASPs and institutions designing compliant trading and settlement workflows; and
- Clear differentiation between registered payment tokens and unregistered alternatives.
USDU’s registration reflects this shift. It is not about broad permissions or implied endorsement, but about operating with precision within a clearly defined, Central Bank-supervised structure.
That clarity is foundational to trust, interoperability, and the continued development of the UAE’s digital asset ecosystem.
