The Ras Al Khaimah-based lender said the approval allows it to proceed with development and testing of a dirham-denominated digital token designed for payments and settlement, subject to meeting the central bank’s final regulatory and operational requirements. The move places RAKBANK among a small but growing group of UAE financial institutions positioning themselves at the intersection of traditional banking and blockchain-based payments.
The proposed token is intended to be fully backed by UAE dirhams held with the bank, maintaining a one-to-one peg and operating within the Central Bank of the UAE’s payment token framework. Officials familiar with the process said the regulator’s in-principle nod reflects comfort with the bank’s governance, reserve management and compliance architecture, while reserving the right to impose additional safeguards before a full licence is granted.
RAKBANK’s entry comes as the central bank pushes ahead with its broader digital payments agenda, which includes domestic instant payments, cross-border settlement pilots and the exploration of tokenised money under strict oversight. The payment token regime, unveiled as part of wider financial infrastructure reforms, is designed to ensure that stablecoins operating in the country are issued only by regulated entities, are fully reserved, and meet anti-money laundering and consumer protection standards.
Bank executives have framed the stablecoin as a tool for faster and cheaper payments rather than a speculative crypto asset. People briefed on the project said early use cases include business-to-business settlements, merchant payments and programmable transfers that could integrate with existing banking channels. Retail usage may follow once regulatory approvals are finalised and distribution partnerships are in place.
The timing is significant. Global interest in stablecoins has accelerated as banks and policymakers look for ways to modernise payments without exposing users to the volatility associated with unbacked digital tokens. In the Gulf, authorities have been particularly keen to anchor innovation within the regulated financial system, contrasting with earlier crypto cycles dominated by offshore issuers.
Market participants note that an AED-backed stablecoin issued by a domestic bank could address a long-standing gap in regional payments. While the dirham is widely used in trade and remittances, cross-border settlement can still involve intermediaries, time delays and higher costs. A regulated token, if interoperable with other payment systems, could shorten settlement cycles and improve transparency.
Competition is also intensifying. Several financial institutions and fintech firms in the UAE have disclosed plans to explore tokenised deposits, blockchain-based settlement networks or payment tokens under the central bank’s framework. International stablecoin issuers have likewise expressed interest in the region, though the regulatory regime effectively prioritises locally supervised entities.
Regulatory scrutiny remains central. Under the payment token rules, issuers must segregate reserves, submit to regular audits and ensure that tokens can be redeemed at par on demand. Any failure to maintain the peg or meet operational standards could trigger supervisory action. Analysts say this emphasis on prudence is designed to prevent the types of collapses that have shaken confidence in unregulated stablecoins elsewhere.
For RAKBANK, the initiative aligns with a broader strategy to expand its digital offerings while staying within conservative risk parameters. The bank has historically focused on small and medium-sized enterprises and retail clients, segments that could benefit from quicker settlements and lower transaction costs. Executives have indicated that partnerships with payment processors and technology providers are under evaluation to support the token’s rollout.
The central bank’s approach also reflects regional coordination. The UAE has been active in cross-border digital currency experiments with other monetary authorities, testing how tokenised money could be used for international settlements. A domestically issued, fully regulated dirham stablecoin could eventually plug into such frameworks, subject to bilateral or multilateral agreements.