The United Arab Emirates has approved its first U.S. dollar-pegged stablecoin under a formal central bank framework, marking a new step in the country’s approach to regulating digital payment tokens.
The Central Bank of the UAE registered USDU, a USD-backed stablecoin issued by Universal Digital Intl Limited, under the Payment Token Services Regulation. The approval makes USDU the first stablecoin recognized by the central bank as a registered foreign payment token, according to the issuer.
The move places the UAE among a small group of jurisdictions that have created a dedicated licensing path for stablecoins while keeping oversight at the central bank level. Authorities have framed the framework as part of a broader effort to modernize payment infrastructure while limiting systemic risk.
Central bank framework defines scope
The Payment Token Services Regulation sets rules for issuance, reserve backing, and governance of payment tokens. Under the framework, foreign payment tokens can be registered if they meet disclosure, custody, and compliance standards defined by the central bank.
USDU is pegged one to one with the U.S. dollar, according to Universal Digital. The company said reserves are held with UAE-based banks, including Emirates NBD and Mashreq, with Mbank named as a strategic banking partner. The issuer said the structure aims to meet local reserve and safeguarding expectations.
However, the framework also limits how such tokens can be used. Foreign payment tokens are not positioned as replacements for cash or domestic payment instruments. Instead, the rules focus on cross-border settlement, digital asset transactions, and regulated financial use cases.
Regulatory background and market context
The approval follows several years of regulatory buildup in the UAE. The central bank introduced the Payment Token Services Regulation to address risks highlighted by past stablecoin failures, including reserve opacity and governance gaps seen globally.
In parallel, financial free zones such as Abu Dhabi Global Market developed their own virtual asset rulebooks. Universal Digital is regulated by ADGM’s Financial Services Regulatory Authority, where it received permission to issue a fiat-referenced token before seeking central bank registration.
The UAE’s approach contrasts with jurisdictions that rely mainly on securities or payments law without a stablecoin-specific framework. By separating domestic payment use from foreign payment tokens, regulators appear to be drawing a clear boundary between everyday retail payments and digital asset infrastructure.
Why the approval matters
The registration gives institutions a regulated USD-linked token that fits within the UAE’s banking and compliance environment. That may appeal to firms operating across the Middle East, Africa, and Asia that rely on dollar settlement but face friction in traditional correspondent banking.
At the same time, the approval does not signal open retail use. The framework emphasizes control, reserve transparency, and limited scope, reflecting lessons from earlier market disruptions rather than a push for rapid consumer adoption.
As global regulators continue to debate stablecoin oversight, the UAE’s decision provides a concrete example of how central banks can permit stablecoins while tightly defining their role in the financial system.
