UAE clears dirham stablecoin for launch

Central Bank of the UAE has granted approval for a dirham-backed digital stablecoin developed by a consortium led by International Holding Company and First Abu Dhabi Bank, marking a significant step in the country’s regulated digital asset ambitions.

The stablecoin, branded DDSC, has been authorised to go live under the central bank’s framework for stored value facilities and payment tokens. It will operate on ADI Chain, described by its backers as an institutional-grade layer-2 blockchain designed to support high-volume, compliant financial transactions.

The approval positions the UAE among a small group of jurisdictions that have moved beyond pilot schemes to formally license fiat-backed stablecoins within a central bank-supervised regime. Officials have framed the move as part of a broader strategy to modernise payment systems, enhance cross-border settlement efficiency and reinforce the dirham’s digital footprint.

International Holding Company, one of the region’s largest listed investment groups by market capitalisation, and First Abu Dhabi Bank, the country’s biggest lender by assets, are backing the initiative through a dedicated vehicle established to issue and manage the token. The stablecoin is fully backed by dirham reserves held within the domestic banking system, with the issuer subject to prudential, governance and anti-money laundering requirements.

Under the central bank’s rules introduced over the past two years, payment tokens referencing the UAE dirham must be redeemable at par value and supported by segregated reserves. Issuers are also required to maintain transparency around backing assets and comply with strict operational risk standards. The DDSC approval indicates the project has met these conditions following supervisory review.

Executives involved in the initiative have argued that a regulated dirham stablecoin can streamline wholesale and retail transactions, reduce settlement times and lower costs for remittances and corporate payments. They have highlighted potential applications in trade finance, supply chain settlement and programmable payments, particularly in sectors where the UAE has a strong international presence.

ADI Chain, the blockchain infrastructure underpinning DDSC, is positioned as an institutional network rather than a public, permissionless chain. Its promoters say it incorporates identity verification, compliance controls and integration layers for banks and regulated financial institutions. By operating as a layer-2 solution, it is designed to offer scalability while anchoring transaction data to a more established base network.

The approval comes as global regulators intensify scrutiny of stablecoins following high-profile collapses in the wider crypto market over the past few years. Authorities in the United States and European Union have introduced or advanced frameworks to bring stablecoin issuers under tighter oversight, focusing on reserve backing, redemption rights and systemic risk.

Within the Gulf, policymakers have sought to balance innovation with financial stability. The UAE has developed a patchwork of regulatory regimes covering digital assets, including the Dubai Virtual Assets Regulatory Authority and the Abu Dhabi Global Market’s financial services framework. The central bank’s move to license a dirham-backed token under its own remit signals a more integrated approach to payment-focused digital instruments.

Market analysts say a domestically issued stablecoin linked directly to the dirham could complement the central bank’s ongoing work on a retail and wholesale central bank digital currency under the Digital Dirham programme. While a CBDC would represent a direct liability of the central bank, a licensed stablecoin remains a private-sector instrument backed by regulated reserves.

For banks such as First Abu Dhabi Bank, participation in a regulated stablecoin venture offers a way to engage with blockchain-based settlement without exposing core operations to unregulated crypto volatility. It also allows lenders to position themselves in emerging digital trade corridors, particularly as regional governments deepen economic ties with Asia and Africa.

Industry specialists note that institutional adoption will depend on interoperability with existing payment rails, legal clarity around tokenised deposits and confidence in redemption mechanisms. They add that transparency around reserve management and audit arrangements will be central to maintaining trust among corporate users and financial counterparties.

The dirham stablecoin landscape has been evolving over the past year, with multiple groups exploring tokenisation projects linked to domestic and cross-border payments. Central Bank of the UAE has repeatedly emphasised that any such instruments must operate within its licensing perimeter, warning that unapproved payment tokens referencing the dirham would not be recognised.

By securing formal approval, the DDSC project distinguishes itself from earlier pilot initiatives that operated in controlled environments. Its backers have indicated that initial deployment will focus on institutional clients before broader integration with fintech platforms and payment service providers.