What is the CBUAE Payment Token Services Regulation?

The Payment Token Services Regulation is the Central Bank of the UAE's rulebook for stablecoins used as a means of payment. It was issued as Circular No. 2/2024 and has been in force since 31 August 2024, per the CBUAE rulebook as of September 2026. It sits on top of the Central Bank Law, which makes providing digital money services a licensed financial activity.

The regulation defines a payment token as a virtual asset that references a single fiat currency and is used as a means of payment — in practice, a fiat-backed stablecoin. It then licenses three activities: payment token issuance, payment token conversion, and payment token custody and transfer. Each requires a CBUAE licence or registration before it may be offered in the UAE or to persons in the UAE.

This perimeter is separate from the virtual-asset regimes. Trading and brokerage of virtual assets in Dubai outside the DIFC is licensed by VARA — our VARA licence is linked from the main page — while the CBUAE rules answer a different question: which tokens may circulate as payment, and on what terms.

What does the regulation prohibit?

Article 2 of the Payment Token Services Regulation prohibits four things: unlicensed payment token services, algorithmic stablecoins, privacy tokens, and interest paid to token holders. These prohibitions apply to everyone in the UAE, including firms already licensed by VARA or the Securities and Commodities Authority.

• No payment token service in or into the UAE without a CBUAE licence or registration, even for SCA- or VARA-licensed firms.
• No issuing algorithmic stablecoins or privacy tokens, and no services or promotions relating to them.
• No interest or other benefit tied to how long a customer holds a payment token (Article 12) — a licensed token pays no yield.
• No promoting payment token services unless you hold, or act for a holder of, the relevant licence or registration.
• Transfers are limited to licensed dirham payment tokens for any lawful purpose, or registered foreign payment tokens used to buy virtual assets.

The yield ban is the point most readers miss. A dirham payment token is designed as money, not an investment product: it sits at par, redeems at par, and earns the holder nothing by design.

How must a dirham payment token be backed and redeemed?

A Dirham Payment Token is an AED-referenced stablecoin from a CBUAE-licensed issuer, backed one-to-one by cash in a segregated escrow account at a UAE-licensed bank. The holder may redeem at par in dirhams, at the latest by the same time on the next business day after the request (Articles 21 and 22).

The reserve rules are strict. The escrow account is denominated in the same currency as the token, sits in the issuer's name at a different UAE-licensed bank, and may hold nothing else. Reconciliation against tokens in circulation runs daily and is reported to the CBUAE; an external auditor confirms the backing monthly.

Redemption is equally prescriptive. The issuer must redeem at face value without delay, may charge only a cost-based fee, and must be able to redeem even if the underlying ledger fails or forks. In an insolvency, customers hold a legal claim on the reserve of assets ahead of other creditors.

The first licensed dirham token, AE Coin, received its CBUAE licence in December 2024, and further approvals have followed. A bank may not issue a payment token directly; it must act through a separate entity.

Can you pay a merchant in USDT in the UAE?

No — a merchant in the UAE may not accept USDT as payment for goods or services. Article 2(7) of the Payment Token Services Regulation allows a business to accept only a Dirham Payment Token from a licensed issuer; a foreign token such as USDT counts as a means of payment only when it buys a virtual asset or a virtual-asset derivative.

The practical consequence is simple. Shops or developers advertising "pay in USDT" sit outside this rule, and the clean route is to sell the USDT for dirhams first and pay in AED. Our guide to cashing out crypto legally in Dubai walks through that sequence.

One boundary matters here: references to "the UAE" in Article 2 exclude the financial free zones, so the DIFC and ADGM are outside this merchant rule. Regulation there is a DFSA or FSRA question, not a CBUAE one.

Where does VARA fit in — CBUAE vs VARA?

The CBUAE regulates stablecoins as payment instruments across the UAE outside the financial free zones, while VARA regulates virtual-asset activities — trading, brokerage, custody — in Dubai outside the DIFC. The same token can sit under both perimeters depending on what you do with it: paying a merchant is a CBUAE question, selling USDT to a broker is a VARA one.

The two regimes overlap at the seams. VARA separately licenses the issuance of fiat-referenced virtual assets in Dubai, and VARA-licensed firms that convert or transfer stablecoins may also need a Non-Objection Registration with the CBUAE. Checking a counterparty starts with the public registers — our one-minute VARA licence check shows how.

Geography shifts the answer too. Abu Dhabi runs its own regime through the FSRA in the ADGM, and onshore UAE activities sit with the SCA; how Dubai and Abu Dhabi crypto rules differ is a separate read.

What does this mean for selling USDT for dirhams?

Selling USDT to a licensed broker for AED is a brokerage trade under the VARA perimeter, not a "payment" under Circular 2/2024. The payment-token rules still shape the trade indirectly: they keep dirham tokens on licensed rails and keep the settlement leg in the banking system.

In practice a compliant sale looks like this at our desk: a written quote for your size, an all-in spread of 0.08% to 0.40% by ticket, and AED in your own bank account the same business day by UAEFTS. The published bands are on our pricing section; desks start around 100,000 USDT, and settlement goes only to an account in your own name.

The bottom line: the CBUAE regulation decides which tokens may be spent like money in the UAE, and that lane belongs to licensed dirham tokens. Everything else — holding, buying and selling USDT — remains a virtual-asset activity, lawful through a VARA-licensed counterparty with a bank paper trail.

This guide is informational and is not legal, tax or investment advice, nor an invitation to buy or sell any virtual asset. Rules and figures are as of September 2026 — re-check the sources before acting. Virtual assets may lose their value in full or in part and are subject to extreme volatility.