Karla Barker 
The UAE’s early move in stablecoin regulation is paying off. Arthur D. Little analyst Mohammad Nikkar says the country took a different route from others: rather than forcing dollar stablecoins and dirham stablecoins to compete, regulators treat them as tools for different jobs.
Business use will come before everyday spending
Adoption is likely to start with institutions and businesses that already handle compliance. Cross-border payments between the UAE, the Gulf, Africa, and South Asia are the main use case. The first large transaction for DDSC, a $30 million institutional payment, points in that direction. Consumer adoption may be slower because UAE residents already have cards and fast local payment options. A dirham stablecoin needs users, liquidity, and retail infrastructure before it can challenge those systems.
Dollar and dirham tokens can coexist
Nikkar does not expect dirham stablecoins to replace dollar stablecoins. The two can sit side by side. Dollar-backed stablecoins, which account for about 97 percent of the fiat-backed market, can handle international transfers. Dirham stablecoins can settle regional deals and tokenized assets. Since the dirham is pegged to the dollar, a UAE-regulated dirham token offers similar economics to a dollar token, only under different supervision and reserve rules. That could make it attractive when one side of a transaction is based in the UAE.
Regulation, liquidity, and connectivity
The UAE has a head start, but the broader Gulf region still faces problems. Regulators in different GCC countries may not accept each other’s stablecoins. If every country builds its own closed system, liquidity stays thin and companies avoid holding unfamiliar tokens. Stablecoins also need smooth connections to existing global networks where larger tokens already trade. The UAE’s ban on algorithmic stablecoins helps reduce risk for banks, especially after Terra’s collapse in 2022.
Stablecoins create mixed pressure for banks. Payment tokens do not earn interest, so they are not a direct replacement for savings deposits. But fintech firms could take over customer-facing apps, pushing banks into the background. Banks might respond by launching tokenized deposits or earning fees from custody, reserve management, and conversion services.
The next moves for the Gulf and beyond
Saudi Arabia appears to be the next big market. Its government announced plans in November 2025 for riyal-pegged stablecoins. The danger is that each country issues a stablecoin without making it compatible with the others. That would leave the region with separate riyal, dinar, and dirham systems.
Trade with Africa and South Asia is another opportunity. A business in Kenya or India could receive dirham stablecoins instead of dollars, getting faster settlement while staying close to dollar exposure because of the peg. The dirham is unlikely to replace the dollar globally, but it can reduce costs on specific trade routes.
The real test is whether stablecoins get used. Arthur D. Little says five indicators, from transaction volumes to cross-border usage, will show if the strategy works in three to five years. Licenses alone will not be enough. If the UAE solves liquidity and interoperability problems, its early regulatory lead could turn into a regional payment network.