RAKBank has received in-principle approval from the Central Bank of the UAE to issue a dirham-backed stablecoin as the Emirates continues efforts to become a regional centre for blockchain-based payments and digital assets.
The stablecoin issuance is subject to the completion of regulatory and operational requirements, the bank said on Wednesday.
The stablecoin is expected to feature one to one backing in dirhams and can be held in segregated, regulated accounts to support full redemption at par value, the lender said. The tokens will be backed by audited smart contracts with real-time reserve attestations, it added.
“Receiving in-principle approval from the Central Bank is an important milestone in our digital assets journey,” said Raheel Ahmed, group chief executive of RAKBank.
A stablecoin is a cryptocurrency whose price is pegged to a reference asset, which can be a fiat currency, commodity or another cryptocurrency. In theory, the peg is meant to keep the value of coins “stable”.
The Central Bank’s Payment Token Services regulation, issued in 2024, allows businesses in the Emirates to accept cryptocurrencies for goods and services if they are dirham-backed stablecoins.
This means other digital assets such as Bitcoin and Ether, and US dollar-backed stablecoins like Tether or Binance USD, will not be allowed for those types of payments in the UAE. Financial free zones are excluded from this regulation.
Dirham-backed stablecoins are different from Central Bank Digital Currencies that many global economies, including the UAE, are working to introduce. Dirham-backed stablecoins could either be private stablecoins, issued by private entities and backed by reserves, or function as CBDCs if issued by the UAE Central Bank. The distinction will lie in the issuer.
A CBDC is a digital form of a government-issued currency. It is similar to a cryptocurrency, except that its value is fixed by the monetary authority and equal to the country's fiat currency.
AE Coin was the first regulated digital currency granted final approval by local authorities in 2024.
The stability of a stablecoin relies on the quality and transparency of the assets held in the issuer’s reserve to back its value. Some stablecoins are fully backed by fiat currencies held in bank accounts, which can be easily audited and verified. Others use a mix of assets – including cryptocurrencies, which can be less stable and more vulnerable to market fluctuations.
The regulation states that no entity can issue a payment token without producing a white paper, submitting it to the Central Bank, receiving acceptance and then publishing it.
A white paper in this context serves as a document that provides detail on the technical specifications and operational data of the payment token. It provides critical details to the Central Bank to assess the viability and security of the token before granting approval.
The regulation adds that banks may not be permitted to directly act as a payment token issuer – an entity that converts fiat money into stablecoin. However, a bank can create a subsidiary, affiliate or another related entity to perform the activities of a payment token issuer, provided that this new entity meets the licensing and regulatory requirements.
Further updates on the pilot phase of the RAKBank stablecoin and its potential expansion will be shared in due course, the lender said.
Last year, RAKBank enabled its retail customers to trade crypto on its mobile app in partnership with a regulated brokerage Bitpanda. The move allowed customers to buy, sell and swap crypto directly from their dirham accounts.
In April, Abu Dhabi entities IHC, ADQ and First Abu Dhabi Bank said they plan to launch a dirham-backed stablecoin fully regulated by the UAE Central Bank, aimed at easing payment solutions. US stablecoin issuer Circle Internet Group was also granted financial services permission by Abu Dhabi authorities in December.
Tether, whose USDT is the world's biggest stablecoin, has also received the go-ahead to develop a stablecoin in the UAE.
Stablecoins experienced a breakthrough moment in 2025 with an 87 per cent increase in settlements to $9 trillion, according to a note by Moody’s Ratings this week. At least 19 new stablecoins were launched last year, the ratings agency said.
