Stablecoin Licence UAE: CBUAE vs VARA — Which Regulator and What It Takes

Stablecoin regulation in the UAE is split between two regulators depending on the currency peg and the jurisdiction of operation. Understanding which regulator applies to your stablecoin is the first and most critical decision.

AED-Pegged Stablecoins: CBUAE is Your Regulator

Dirham-denominated payment tokens fall under direct CBUAE supervision under Federal Decree Law No. 6 of 2025. The CBUAE issued the Payment Token Services Regulation (Circular No. 2/2024) which governs issuance, redemption, and reserve management for AED-pegged tokens. The first approved AED stablecoin is AE Coin, approved by the CBUAE in 2024.

• 100% reserve backing required in approved asset classes
• Reserves must be held with UAE-licensed custodian banks
• Real-time proof of reserves mechanisms required
• Redemption at par guaranteed to token holders at all times
• Regular CBUAE audits and reporting obligations
• Capital adequacy proportional to tokens in circulation

Non-AED Stablecoins in Dubai: VARA Governs

USD-pegged, EUR-pegged, or basket-referenced stablecoins issued or distributed in Dubai fall under VARA's Virtual Asset Issuance Rulebook. Version 2.0 (effective June 2025) classifies them as Fully Regulated Virtual Assets (FRVAs) for single fiat-pegged tokens and Asset-Referenced Virtual Assets (ARVAs) for basket-backed tokens.

• FRVA issuers require Category 1 VA Issuance licence from VARA
• 100% reserve backing with daily attestations
• ARVA issuers require AED 1.5 million minimum capital or 2% of reserves
• Whitepaper with technical documentation and risk disclosures required
• Distribution only through VARA-licensed distributors or exchanges

Technology Architecture Requirements

• Blockchain layer: smart contract audit, mint and burn controls, immutable transaction records
• Banking integration: fiat on-ramp and off-ramp with licensed UAE banks
• Reserve management system: real-time reconciliation between tokens in circulation and reserve assets
• AML/CFT monitoring: on-chain transaction screening, sanctions checking, Travel Rule compliance
• Proof of reserves: automated or third-party verified reserve attestation mechanism

Common Stablecoin Compliance Gaps

• Reserve management architecture not formally documented
• Smart contract audit not completed by a recognised firm
• AML/CFT programme not mapped to VARA or CBUAE specific requirements
• Proof of reserves mechanism missing or not auditable
• Governance structure lacks qualified individuals for regulator fit-and-proper assessment