A Stablecoin Is a Payments Question Before It Is a Crypto Question

The Capital Market Authority, formerly the Securities and Commodities Authority, states the division in its published virtual-asset guidelines: virtual assets are divided into two parts, virtual assets for investment purposes and virtual assets for payment purposes, and virtual assets for payment purposes, including stored value facilities, are subject to the jurisdiction of the Central Bank. The guidelines then carve back into the investment side any virtual asset approved by the Central Bank for listing and trading for investment purposes on the virtual assets platform.

The same document lists what its framework does not apply to at all: digital securities and digital commodity derivative contracts, which are treated as securities under conventional securities legislation; service tokens and non-fungible tokens that do not represent investment-purpose virtual assets; software for mining or creating virtual assets; loyalty programmes; and virtual assets for payment purposes. The press release accompanying Cabinet Resolution No. 111 of 2022 says the same thing in one sentence.

Two things follow. A token can change regulator without a single line of its code changing, because only its use changes. And "stablecoin" is not the operative term anywhere in that guidance. The regulator's phrase is virtual assets for payment purposes, which describes what the token does rather than how it is engineered. The Central Bank's own term, payment token, is defined by reference to a stable value held against the same fiat currency the token is denominated in, or against another payment token in that currency.

VARA's VA Issuance Rulebook defines a fiat-referenced virtual asset as one purporting to maintain a stable value in relation to one or more fiat currencies or other fiat-referenced assets, without legal tender status in the UAE, and not issued for use as a means of payment for goods or services in the UAE. Then it excludes the obvious case: issuance of any fiat-referenced virtual asset purporting to maintain a stable value in relation to the dirham shall not be approved under that rulebook or the associated rules, and remains under the sole and exclusive regulatory purview of the Central Bank.

The Regulations go further and keep a standing option open. VARA may, in its sole discretion, classify any virtual asset, or type of virtual asset, as being regulated by the Central Bank. Central bank digital currency is already carved out entirely, and VASPs are required to comply with applicable federal Central Bank regulations and guidance as they pertain to specific virtual assets, including payment token services.

For anything that is not dirham-referenced, VARA's issuance framework runs in tiers. A fiat-referenced or asset-referenced issuance is a Category 1 issuance requiring a licence, with an annexed rule set on top; everything else that is not exempt is Category 2, which is not licensed but must, in the rulebook's own defined term, be placed or distributed through or by a Licensed Distributor. There is a live inconsistency between the rulebook and VARA's own explanatory pages about whether Category 2 needs prior approval, and we do not state either position as settled. For a specific token it has to be put to VARA through the commercial licensor.

The Payment Token Services Regulation describes three categories of payment token service: payment token issuance, payment token conversion, and payment token custody and transfer. Article 2(1) provides that no person may perform any of them within the UAE, or directed to persons in the UAE, unless licensed or registered by the Central Bank. That is a standalone prohibition on every person, and it does not become weaker because the firm holds something else.

Articles 2(2) and 2(3) carry the express extension: the prohibition applies to all persons, including any person acting in the course of performing virtual asset activities for which it is licensed or regulated by the federal securities regulator or by a local licensing authority. Article 2(1) already reaches every person without that wording. The limit is geographic. Article 2(13) provides that "the UAE" in Article 2 excludes the financial free zones, which include ADGM.

Denomination is fixed rather than designed. Dirham payment tokens must be denominated only in dirham, and foreign payment tokens only in a foreign currency (Article 12). A licensed dirham issuer must hold initial and ongoing capital of 15 million dirhams plus 0.5% of the face value of tokens outstanding, with an unconditional bank guarantee for the full paid-up capital filed with the application (Articles 13 and 15). It may issue dirham tokens only to persons resident in the UAE (Article 2(6)). Algorithmic stablecoins and privacy tokens may not be issued, serviced or even promoted. Those prohibitions, at Article 2(3) and Article 2(11), are the ones that carry the express extension to persons already licensed elsewhere in the UAE.

The correspondence is visible in the activity registers. In the Dubai mainland activity list we hold, three stablecoin rows appear (issuance, custody and transfer, and exchange), and each is flagged to a Central Bank payment token permission. They map one to one onto the Central Bank's own three categories, which is about as clean a signal as an activity catalogue ever gives that the second regulator is not optional.

ADGM's FSRA uses the term fiat-referenced token for a stablecoin referencing a fixed amount of a single fiat currency and redeemable on demand from its issuer for that amount, and it makes issuing one a distinct regulated activity with its own prudential category. That is the same category as managing assets and providing custody, but with a materially higher capital floor attached to the issuance permission. We do not publish the figures; the shape is the point, and the shape is that issuing a stablecoin is not a variation on holding a virtual-asset permission.

The asset-acceptance mechanic runs the opposite way from ADGM's treatment of ordinary virtual assets. For fiat-referenced tokens the regulator itself decides and publishes a consolidated list, acceptance is granted per token and per network rather than per token, and acceptance results in acceptance for use only within ADGM. Tokens that are asset-backed, that reference a basket of currencies, or where the redemption right is contingent or uncertain are stated to be ineligible for acceptance.

And where an asset aims at stability against something other than a single fiat currency, ADGM's guidance says in terms that it will not satisfy the definition, and that a person wanting to carry on a regulated activity with it should contact the FSRA to discuss the regulatory treatment of the specific asset. That is a regulator writing down, in its own words, that the answer is bespoke.

The Capital Market Authority issued Chairman's Resolution No. (16/Chairman) of 2026, providing that entities licensed by the Central Bank, except insurance companies, may practise the activities set out in its virtual-assets resolution. That is a genuine structuring lever: for a group that already holds or can obtain a Central Bank licence, the route into the federal virtual-asset activity set is not necessarily a second licence.

What the resolution does not say is whether the permission reaches the licensee's group, its subsidiaries or its branches, or whether the Central Bank's own consent is also required. The insurance carve-out is stated; nothing else is. For payment token issuing the Central Bank's own regulation is stricter: Article 2(8) of the Payment Token Services Regulation bars a bank from acting as a payment token issuer, though it may set up a subsidiary, affiliate or related entity to do so. A provision like this is worth a great deal to the right group and nothing at all to the wrong one, and telling the two apart is not a reading exercise.

A token that settles obligations and a token held for gain can be the same asset. Nothing published tells you how the regulators characterise a mixed-use instrument, or who decides, and that answer picks the regulator, the permission and the capital treatment. It is the single largest open question in this area and it is asked at design stage or not at all.

The reader also cannot see, from any published page, whether a particular reserve, redemption and denomination design is licensable at all, or which of two regulators has to be approached first so that the other does not foreclose the structure. Sequencing here is not administrative. Approaching in the wrong order can leave a design that neither regulator will now take.

A stablecoin design is licensable or not licensable long before anyone opens an application. What decides it is the reserve, the redemption right, the denomination and the intended use, read together against two regulators who divide the field by purpose rather than by technology, and the order in which they are approached can foreclose the structure.

Bring us the token design and the market plan before the entity exists, and we will tell you which regime the instrument actually sits in, what in the design is inconsistent with it, and which regulator has to be approached first. This is structuring commentary rather than legal advice, and it is not an opinion on how any regulator will read a particular set of facts.