UAE Law and Practice Contributed by: Irina Heaver and Zainab Kamran, NeosLegal
5.3 Liability There have been no judicial decisions or regulatory enforcement actions in the UAE specifically address- ing accountability or liability in the context of DeFi, and the legal framework in this area remains untested.
mary regulation remaining with the FSRA or the DFSA respectively. Non-AED fiat-referenced stablecoins issued in or from onshore Dubai are regulated by VARA as Fiat-Refer- enced Virtual Assets (FRVAs) under the Virtual Asset Issuance Rulebook. Issuers must hold a Category 1 VARA licence, maintain reserves of at least 100% of circulating supply in the reference currency held in cash or highly liquid instruments, and comply with White Paper and disclosure requirements. Financial Free Zones In ADGM, the FSRA operates its own dedicated Fiat- Referenced Token framework, introduced in December 2024 and expanded with effect from 1 January 2026. The FSRA framework covers non-AED stablecoins, with AED-referenced issuance by ADGM-licensed firms expressly prohibited and remaining within the scope of the CBUAE regime. The FSRA automatically accepts FRTs issued by ADGM-licensed issuers and applies a risk-based assessment for foreign FRTs seeking acceptance for use within the free zone. In the DIFC, the DFSA does not operate a stablecoin issuance regime but retains responsibility for assess- ing and approving Fiat Crypto Tokens for use by DFSA-licensed firms, recognising as of January 2026 three tokens: EURC, USDC and RLUSD. Algorithmic stablecoins are prohibited across all UAE Each of the three UAE stablecoin regimes imposes its own requirements on reserve composition, custody and interest, with meaningful differences between them. Under the CBUAE’s PTSR, reserves must equal 100% of the face value of tokens in circulation at all times, held in AED in a segregated escrow account at a UAE- licensed bank and ring-fenced from other creditors. By default, reserves must be held entirely in cash. Where the issuer is a wholly-owned subsidiary of a UAE bank, up to 50% may be invested in UAE government bonds or CBUAE Monetary Bills with an average duration of no more than six months. Daily reconciliation against regulatory frameworks. 6.2.3 Backing Assets
6. Payments and Stablecoins 6.1 Payments
Payments in crypto-assets occupy a developing and increasingly regulated space in the UAE. Virtual assets do not constitute legal tender, and the AED remains the only lawful means of settling debts. However, the use of virtual assets and payment tokens in commer- cial transactions is subject to a framework that con- tinues to evolve. 6.2 Stablecoins 6.2.1 Fiat Currency and Algorithmic Stablecoins The UAE regulatory framework draws an explicit dis- tinction between fiat-backed and algorithmic stable- coins. Under the CBUAE’s PTSR, a Payment Token must be backed by high-quality liquid assets denomi- nated in the same currency as the token and redeem- able at par on demand. Algorithmic stablecoins, which use a formula or protocol rather than reserve assets to maintain their peg, do not meet this definition and are strictly prohibited from issuance, use and promotion within the UAE. 6.2.2 Stablecoin Regulation Onshore UAE Fiat-backed stablecoins are regulated in the UAE, and the framework is notable for its deliberate segmenta- tion across three distinct regimes determined by refer- ence currency and jurisdiction of issuance. AED-referenced stablecoins are regulated by the CBUAE under the PTSR, which applies to entities incorporated in the mainland UAE. A Dirham Pay- ment Token must be fully backed by high-quality liq- uid assets denominated in AED and redeemable at par on demand. Entities incorporated in ADGM or the DIFC fall outside the PTSR’s direct licensing scope but may apply to register with the CBUAE as Regis- tered Foreign Payment Token Issuers, with their pri-
690 CHAMBERS.COM
Powered by FlippingBook