In June 2024, the Central Bank of the United Arab Emirates issued Circular No. 2/2024, introducing the Payment Token Services Regulation (PTSR). Effective from July 2024 with a one-year transitional period until July 2025, the regulation establishes a framework for stablecoins, referred to as Payment Tokens and their use across the UAE. The PTSR marks a pivotal step in the UAE’s ambition to become a global hub for fintech and digital assets, aiming to balance innovation with consumer protection and financial stability.
What Is a Payment Token?
A Payment Token is defined under the PTSR as a virtual asset that maintains a stable value by referencing a fiat currency. In practice, this includes stablecoins pegged to the UAE Dirham (AED) or foreign currencies such as the US Dollar (USD). The regulation differentiates between Dirham Payment Tokens, which require a full license, and Foreign Payment Tokens, which require registration with the CBUAE. Tokens that are algorithmic and not fully backed by fiat, as well as privacy-focused cryptocurrencies, are prohibited.
Scope of Regulated Services
The PTSR regulates three core services. Payment Token Issuance covers the creation and management of stablecoins. Payment Token Conversion involves exchanging tokens for fiat currency, other cryptocurrencies, or different tokens. Finally, Payment Token Custody and Transfer governs the safekeeping and movement of tokens. Any individual or entity providing these services in the UAE, or targeting UAE residents, must obtain CBUAE authorisation.
Licensing and Compliance
The regulation sets out licensing requirements based on the type of service offered. Entities issuing AED-pegged stablecoins must obtain an Issuer License, while providers facilitating conversion need a Conversion Provider License. Custody and transfer services require a Custodian & Transferor License. Foreign stablecoin issuers can register as Foreign Payment Token Service Providers, and local banks, exchange houses, and licensed virtual asset service providers may seek non-objection registrations to integrate licensed stablecoins into their services.
The PTSR also establishes clear compliance standards. Issuers are required to maintain 100% reserves in liquid, high-quality assets, with at least half held as cash in UAE banks. Tokens must be redeemable at par within one business day. Providers must also ensure robust consumer protections, including transparent disclosures and complaint-handling systems, and comply fully with UAE anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. High standards for IT infrastructure, cybersecurity, and outsourcing practices are mandatory. Additionally, merchants may only accept licensed payment tokens, and issuers are prohibited from paying interest or yield on tokens. The CBUAE can impose limits on issuance, transaction volumes, or customer numbers to manage systemic risk.
Impact on Businesses and Consumers
For businesses and merchants, the PTSR requires a shift from accepting unregulated cryptocurrencies to licensed stablecoins. While this limits the use of volatile assets like Bitcoin for everyday payments, it introduces regulated, stable, and legally protected digital transactions. Businesses adopting licensed stablecoins can benefit from lower costs, faster payments, and increased consumer trust.
Financial institutions and payment providers gain clarity under the PTSR, enabling them to issue and integrate stablecoins into their services confidently. For example, AE Coin became the first licensed AED stablecoin in 2024, demonstrating how banks, fintechs, and exchanges can innovate in payments, remittances, and cross-border transactions while remaining fully compliant.
For consumers, the regulation provides strong protections, including guaranteed 1:1 redemption, legal safeguards against fraud, and assurance that licensed tokens are safe for use in digital transactions. Overall, consumers can expect more transparent and stable digital payment options, while speculative cryptocurrencies remain primarily for investment purposes.
Policy Goals and Future Outlook
The PTSR is part of the UAE’s Financial Infrastructure Transformation Program and supports broader initiatives such as the Digital Dirham (CBDC). By focusing on regulated stablecoins, the UAE aims to build a secure and efficient digital payment ecosystem, encourage innovation while protecting consumers, and position itself as a regional leader in digital payments. While compliance may be challenging, particularly for startups, the framework establishes the UAE as one of the most forward-thinking jurisdictions for stablecoins globally.
Conclusion
The Payment Token Services Regulation marks a pivotal moment for digital finance in the UAE. By establishing clear rules for stablecoins, restricting unregulated cryptocurrency payments, and enforcing robust consumer protections, the UAE is creating a secure and trusted foundation for digital payments. For businesses, financial institutions, and consumers, the PTSR presents both a challenge and an opportunity: adapt to the new regulatory framework or risk falling behind as the UAE leads in digital asset innovation.
At Nephos Global, we support businesses in navigating this evolving landscape through stablecoin advisory, regulatory compliance guidance, and attestations. Whether you are issuing stablecoins, integrating digital assets into your operations, or seeking assurance on compliance, our team helps ensure your business stays fully compliant, secure and ready to leverage opportunities in the UAE’s digital asset ecosystem.
