The regulatory authority for ADGM in the UAE issues its stablecoin framework

The regulatory arm of ADGM, the FSRA (Financial Services Regulatory Authority) in the UAE, has just issued its fiat-referenced-tokens framework, better known as its stablecoin regulations. The new framework expands the suite of digital assets already offered by ADGM regulatory authority.

As per the press release, the framework introduces several key components that establish robust standards for FRT issuers to ensure financial stability and investor protection such as reserve assets, governance and integrity, transparent disclosure, prudential safeguards, and redemption rights.

The framework makes FRT issuance a distinct Regulated Activity within ADGM’s comprehensive financial services regulatory regime.  It has been designed to be risk-proportionate while ensuring FRT issuers operate in a safe and prudent manner. 

Emmanuel Givanakis, CEO of the ADGM FSRA stated, “Our FRT framework is a significant milestone in ADGM’s evolution as a progressive international financial center. Through extensive consultation with industry stakeholders, we have created a regime that balances innovation with strong regulatory oversight. This framework provides the regulatory certainty that industry participants need while maintaining high standards of financial stability and investor protection. We believe this positions ADGM as a premier jurisdiction for responsible FRT issuance and shows our commitment to fostering responsible innovation in financial services.”

Fiat-referenced tokens can be used as forms of payment

As per the framework, an accepted fiat-referenced token is one that, in the opinion of the Regulator, meets the requirements that permit a regulated activity to be carried on in relation to it.

The FSRA defined a Fiat-Referenced Token (FRT) as a digital asset, the transfer and storage of which is achieved through the use of a distributed ledger (DLT) or similar technology. The FRT can be used as a medium of exchange with a stable store of value, by referencing a fixed amount of a single fiat currency; and enabling the holder to redeem the token in exchange for the amount of the fiat currency referred to from its issuer upon demand.

The fiat-referenced token can be used for remittance payments, and payment transactions, including transfers, payments for services, direct debits, credit transfers between bank accounts, including standing orders, and others.

Central Bank of UAE also issued its stablecoin regulations

In June the UAE Central Bank issued its UAE Stablecoin Payment Token Services Regulation pertaining to payment tokens, not allowing algorithmic tokens to be included and only allowing foreign stablecoins to be used to purchase virtual assets, while AED stablecoins could be used to purchase products and services within the UAE

The Central Bank of the UAE defined Payment Token Services as being digital payment services in the UAE comprising three categories, namely Payment Token Issuance, Payment Token Conversion, and Payment Token Custody and Transfer.

Since then Tether announced that it would be launching an AED stablecoin in early 2025, while AED Stablecoin LLC in the UAE announced that the Central Bank of UAE had provided it with in-principle approval to launch and establish its own stablecoin, AE Coin.