The UAE Central Bank (the CBUAE) has issued its Payment Token Services Regulation (the PTSR) for regulating stablecoins-related services in the UAE. The PTSR applies across the UAE except in the Dubai International Financial Centre (the DIFC) and the Abu Dhabi Global Market (the ADGM). We note that the PTSR also applies to entities licensed by the Virtual Asset Regulatory Authority (the VARA).

Under the new PTSR a “Payment Token” is defined to include stablecoins whose value references a fiat currency or other stablecoins that are denominated in the same fiat currency.

New prohibitions and regulated activities

The PTSR contains (among others) the following prohibitions from:

  • carrying out “Payment Token Services” in the UAE, or directed to persons in the UAE, without a license or registration from the CBUAE. The new regulated services consist of providing issuance, custody and transfer, and the conversion of Payment Tokens; and
  • making payments in Virtual Assets (i.e. any cryptocurrency), unless that Virtual Asset is either:
    • a “Dirham Payment Token” (i.e. a UAE Dirham-denominated stablecoin) issued by a CBUAE-licensed issuer; or
    • a “Foreign Payment Token” (i.e. a non-Dirham denominated token) issued by a CBUAE-registered issuer.

New licensing, registration and no-objection regime

Only entities incorporated in the UAE can apply for a license for Payment Token Services. However, non-UAE entities (including those established in the DIFC or the ADGM) may offer to UAE investors Payment Tokens that are not UAE-Dirham denominated provided the issuer is registered with the CBUAE as a “Registered Foreign Payment Token Issuer”.

It is not clear whether the process for obtaining a license or registration under the PTSR will be the same as the CBUAE’s current licensing process, and it is too early to know what the process and application forms look like, what the CBUAE licensing fees and processing time are.

Entities holding a license from the VARA or the Emirates Securities Commodities Authority (the SCA) need to apply for a Non-Objection Registration (NOR) in order to continue providing custody, transfer and conversion services in relation to stablecoins under their current license. In applying for a NOR, these entities will need to demonstrate compliance with certain rules within the PTSR.

Transitional period

There is a one-year transitional period which ends on 14 June 2025, during which the PTSR and the prohibitions it contains (including on using Virtual Assets as payment) will not apply.