UAE Central Bank Implements New Stablecoin Rules to Secure Digital Payments

The Central Bank of the UAE (CBUAE) has introduced a mandatory regulatory framework for stablecoins, signaling a shift toward formalizing digital currency within the national financial system. The "Payment Token Services Regulation" establishes clear boundaries for the issuance, licensing, and use of digital assets pegged to fiat currencies, specifically focusing on protecting the UAE dirham and ensuring payment stability. Licensing for Dirham-Backed Tokens Under the new rules, any entity issuing a stablecoin pegged to the UAE dirham must obtain a specific license from the CBUAE. The regulation distinguishes between "payment tokens," which are backed by fiat and used for transactions, and other digital assets. By restricting domestic retail payments to dirham-backed tokens, the central bank aims to mitigate risks associated with currency volatility and maintain control over the local money supply. Foreign currency-pegged stablecoins are permitted for certain uses but cannot be used for purchasing goods and services within the UAE unless specifically authorized. Restrictions on Algorithmic Assets A critical component of the framework is the prohibition of algorithmic stablecoins…