Abu Dhabi-based Universal Digital launched USDU on January 29 as the first USD-backed stablecoin registered under the UAE Central Bank's Payment Token Services Regulation.
The registration creates a compliant settlement option for professional clients trading digital assets in the UAE, though usage restrictions prevent general payments or retail adoption.
Tether's USDT and Circle's USDC dominate UAE cryptocurrency trading despite operating without Central Bank registration, raising questions about demand for additional compliance overhead versus existing market infrastructure.
What Happened
Universal Digital obtained Foreign Payment Token Issuer registration from the Central Bank of the UAE alongside USDU's launch. The company operates under dual regulation from the Financial Services Regulatory Authority in Abu Dhabi Global Market and the national Central Bank.
USDU functions exclusively for settling digital asset transactions and derivatives within the UAE's regulatory framework. The token cannot be used for mainland consumer payments, vehicle purchases, rent payments, or other general commercial transactions that existing payment systems already handle efficiently.
The ERC-20 token maintains 1:1 dollar backing through reserves at Emirates NBD and Mashreq banks, with Mbank providing corporate banking services and monthly attestations by an international accounting firm.
Aquanow serves as global distribution partner under Dubai's Virtual Assets Regulatory Authority oversight. Universal collaborates with AE Coin, the Central Bank's licensed dirham-denominated stablecoin, to enable future USD-AED conversions for domestic settlements.
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Regulatory Context
The Payment Token Services Regulation requires UAE digital asset settlements occur in fiat currency or registered payment tokens. Universal Digital's registration provides the only formally compliant USD stablecoin option under this framework.
However, USDT and USDC circulate widely across UAE cryptocurrency exchanges and over-the-counter desks without registration. These established stablecoins offer broader utility, deeper liquidity, and fewer restrictions than USDU's professional-only, settlement-specific design permits.
The UAE Central Bank previously approved AE Coin and Zand Bank's AED-backed stablecoin for local currency settlements. First Abu Dhabi Bank and RAKBANK reportedly hold in-principle approvals for additional dirham stablecoins, though neither institution has confirmed development timelines.
Universal Digital's conservative structure targets institutional adoption rather than competing directly with consumer-focused stablecoins or retail payment systems. The company emphasizes regulatory compliance and banking integration over market share or transaction volume growth.
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