Stablecoins have moved rapidly from the periphery of the crypto‑asset ecosystem to a position of increasing regulatory and policy focus. Designed to maintain a stable value and often positioned as a bridge between traditional finance and digital markets, stablecoins raise questions that cut across payments regulation, financial markets law, consumer protection, and financial stability. As their use in payments, settlement, and on‑chain financial infrastructure continues to expand, regulators have sought to bring stablecoin‑related activities within clearer and more comprehensive supervisory frameworks.
This article provides a comparative analysis of the regulatory approaches to stablecoins in three jurisdictions that are each seeking to position themselves as credible and internationally competitive hubs for digital asset activity: the United Kingdom, the European Union and the United Arab Emirates. While each jurisdiction recognises the potential benefits of stablecoins, their regulatory responses reflect differing institutional structures, policy priorities and legal starting points.
We examine both current and emerging regimes governing stablecoin‑related activities, with a particular focus on the requirements for licensing or authorisation to undertake issuance, custody, transfer, conversion, and the promotion and marketing of stablecoins. The analysis highlights key points of divergence, including how each framework defines in‑scope stablecoins, the extent to which regulation is activity‑based or token‑based, the allocation of supervisory responsibility between regulators, and the treatment of stablecoins used primarily for payments as opposed to investment or trading purposes.
The comparison also illustrates differing approaches to territorial scope and cross‑border activity. In the EU, MiCAR establishes a harmonised framework with passporting rights across Member States, whereas the UK’s evolving regime adopts a more granular, activity‑ and establishment‑based approach. By contrast, the UAE operates a multi‑regulator model, with distinct regimes applying depending on the nature of the stablecoin, the underlying reference asset, and the geographic locus of the activity.
In addition, this article identifies areas of regulatory uncertainty, transitional issues, and exemptions that may be relevant to certain business models or categories of stablecoin. By setting these regimes alongside one another, we aim to provide practical insight into how firms can navigate an increasingly complex regulatory landscape when structuring, operating, or promoting stablecoin arrangements on a cross‑border basis.
Current regulatory approach in the UK
The UK does not yet have a bespoke statutory regime, or statutory definition, for stablecoins. Instead, stablecoin activity is currently regulated through a patchwork of existing frameworks, principally anti-money laundering and counter-terrorist financing regulation, payments and e-money regulation, and financial promotions rules. Firms are brought into scope not by virtue of issuing or dealing in stablecoins as such, but based on regimes that capture activities in cryptoassets more generally, including exchange, transfer, custody, and issuance, broadly consistent with the international concept of a virtual asset service provider.
Firms conducting certain activities in relation to stablecoins are subject to registration under the UK’s anti money laundering and counter terrorist financing framework (the current UK AML regime). In particular, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) apply to anyone exchanging, arranging, or making arrangements with a view to the exchange of stablecoins for money or other cryptoassets in the UK by way of business. Firms within scope must be registered with the Financial Conduct Authority (FCA) and comply with ongoing AML/CTF obligations. The scope of the current framework is subject to exemptions, including where activities are not conducted by way of business, or take place outside the UK.
Stablecoin related financial promotions are subject to the UK financial promotions regime under the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. This regime governs how stablecoin services can be communicated to UK consumers. Specific examples are available to firms registered under the MLRs; in general, promotions must be made or approved by an authorised person, and must be fair, clear and not misleading.
In principle, a stablecoin could meet the definition of “electronic money” under the Electronic Money Regulations 2011, in which case its issuer would require authorisation or registration as an electronic money institution and would be subject to conduct, safeguarding, and prudential requirements. In practice, however, most existing stablecoin arrangements are not regarded as e-money.
In addition, HM Treasury has the power to designate a payment system involving “digital settlement assets” – which may include a stablecoin arrangement – and firms relating to it, as “systemic”. Where such a designation is made, the relevant firms are regulated by the Bank of England (BoE), on the basis that disruption or failure of the stablecoin arrangement could pose risks to UK financial stability. No stablecoin arrangements have been designated as systemic to date.
Whilst not regulating stablecoins directly, the Prudential Regulation Authority (PRA) has published guidance that any if deposit-takers or their groups want to issue stablecoins to retail customers, then this should be done from separate non-deposit-taking and insolvency-remote entities.
Future regulatory approach in the UK
The UK is in the process of implementing a comprehensive new regime for cryptoassets, including stablecoins (the new UK cryptoasset regime), through the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025. The new regime currently sits alongside the UK’s payments regulation, although the final relationship between the two regimes remains subject to clarification. The new UK cryptoasset regime is expected to be implemented in October 2027, at which point the regimes relevant to stablecoins will come fully into force. In parallel, the BoE is finalising its rules for systemic stablecoins.
Under the new UK cryptoasset regime, the FCA will continue to be the primary regulator for non systemic stablecoins. The FCA will regulate certain stablecoin issuers and oversee new regulated activities relating to stablecoins, including dealing and arranging deals, custody, staking and the operation of trading venues. It will also oversee new public offer, admission to trading and market abuse regimes that will apply to stablecoins, and will continue to supervise financial promotions.
The new regime introduces the concept of a “qualifying stablecoin”. A qualifying stablecoin is a stablecoin that references one or more fiat currencies and seeks to maintain a stable value in relation to that fiat currency by holding fiat currencies, or fiat currencies together with other assets, as backing assets. Significantly, the new regime expressly provides that a qualifying stablecoin is not electronic money and not a collective investment scheme; an attempt to clarify the definitional ambiguity in the current framework.
The scope of the new UK cryptoasset regime is activity based and territorial. For qualifying stablecoin issuance specifically, a firm is only considered to be issuing in the UK if it carries out all three components of issuance from a UK establishment: offering the stablecoin for sale or subscription, undertaking redemption, and holding the backing assets. Exemptions apply where elements of the qualifying stablecoin are conducted outside the UK or where the qualifying stablecoin is exchanged for goods and services.
The FCA has confirmed that the application window for the new regime will begin on 30 September 2026 and close on 28 February 2027. Where a firm applies for authorisation (or variation) during the application period, the FCA (and the PRA for dual-regulated firms) expect to determine its application on or before the new regime commences in October 2027. However, if the FCA has not finalised their assessment of any applications that have been submitted during this time by 25 October 2027, these firms will be able to continue to provide their cryptoasset services until their application is determined.
As set out above, the BoE regime for systemic stablecoins remains unchanged, with firms being in scope of the regime once designated by HM Treasury. The FCA and BoE expect to operate a joint framework for supervising systemic stablecoins, though the operational detail has yet to be published.
The PRA will acquire no new stablecoin remit, but will continue to regulate deposit-taking groups where they issue a stablecoin. Whether the PRA will amend the guidance referred to above remains unclear.
Regulatory approach in the European Union
In the European Union, stablecoins are primarily regulated under the Markets in Crypto-Assets Regulation (MiCAR), complemented by national laws in each EU Member State and supplemented by delegated acts, regulatory technical standards and guidelines.
Supervision responsibility lies with the relevant Member State’s national competent authority (NCA). However, if a stablecoin qualifies as either an e-money token (EMT) or an asset-referenced token (ART) and is designated as ‘significant’, supervision shifts to the European Banking Authority.
Other EU legislation may also apply, such as the Payment Services Directive (PSD2). The execution of transfers of EMTs may qualify as a payment service, which could result in additional PSD2 regulatory compliance requirements.
From an AML perspective, the Wire and Crypto-asset Transfer Regulation (WCTR) amended the Fourth Anti Money Laundering Directive (AMLD4). As a result, the crypto-asset regime under MiCAR and the AML/CTF rules under WCTR and AMLD4 are now aligned.
MiCAR does not use the term “stablecoin”. Instead, it regulates crypto-assets designed to maintain a stable value, whether classified as ARTs, EMTs or otherwise falling within its scope. Specifically:
- ARTs are a type of crypto-asset that is not an EMT and which aims to maintain a stable value by referencing another value or right (or a combination thereof, including official currencies). ARTs cannot bear interest and are primarily intended to be used as a means of exchange or payment, not as a store of value.
- EMTs are a type of crypto-asset that aims to maintain a stable value by referencing the value of one official currency. These are the typical fiat-referenced stablecoins and cannot bear interest. Like electronic money, EMTs are intended for use in making payments and as digital replacements for coins or banknotes.
MiCAR applies to persons engaged in the issuance, offering to the public and admission to trading of ART and EMT within the EU, as well as the provision of crypto-asset services as defined under MiCAR (e.g. custody of crypto-assets, operation of a trading platform; exchange of crypto-assets, reception and transmission of orders, advice on crypto-assets, etc.). The issuer of ARTs must be established in the EU and must either have obtained a licence from the NCA or already be licensed as a credit institution. EMT issuers must be credit institutions or electronic money institutions.
Marketing communications relating to a public offer of crypto-assets (including ARTs and/or EMTs) must be fair and clear and must not be misleading. They must also be consistent with the information published in the white paper. Such communications must be published and notified to the NCAs, but do not require prior approval from them.
Under MiCAR, only crypto-asset service providers (CASP) that have been authorised by the relevant NCA prior to providing one or more crypto-asset services on a professional basis and that have a registered office in an EU Member State where they carry out at least part of their crypto-asset services, may provide crypto-asset services.
Entities that are already regulated, such as credit institutions, central securities depositories and investment firms, may provide crypto-asset services under MiCAR, provided they notify their NCA and comply with the relevant requirements. Once authorised by the relevant NCA, a CASP shall be allowed to perform the crypto-asset services covered by its licence throughout the EU, either on a cross-border basis or through the right of establishment (e.g. through a local branch).
In terms of exemptions, offers of ARTs are subject to exemptions if:
- over a period of 12 months, the average outstanding value of the ART never exceeds €5 million, and the issuer is not linked to a network of other exempt issuers; or
- the offer is addressed solely to qualified investors and ART tokens can only be held by such investors.
Offers of EMTs are subject to exemptions in line with those provided under the Electronic Money Directive, such as the limited network exemption or an exemption if the EMTs do not exceed an average outstanding amount of €5,000,000. MiCAR provides for a reverse solicitation exemption under which if a customer established or situated in the European Union initiates the provision of a crypto-asset service by a third country firm on its own initiative, this third-country firm is not subject to the authorisation requirement.
Regulatory approach in the UAE
The Central Bank of the United Arab Emirates (CBUAE) regulates stablecoins backed by or pegged to fiat currency. In Dubai, stablecoins pegged to currencies (excluding the Dirham, the UAE’s fiat currency), and real-world assets are governed by the Virtual Asset Regulatory Authority (VARA).
The main legal and regulatory frameworks for stablecoins in the UAE are:
- CBUAE introduced the Payment Token Services Regulation (CBUAE Regulation), which sets out rules for certain regulated stablecoin activity (Payment Token Services).
- VARA has established regulations and rulebooks to govern virtual assets and related activities in Dubai (VARA Rules and Regulations).
- The UAE Capital Markets Authority (CMA) governs security tokens and commodity token contracts. The rules for these activities are set out in the Regulation Concerning Security Tokens and Commodity Tokens Contracts (CMA Regulation). CMA’s regulatory scope regarding stablecoins is more limited, and its interaction with CBUAE and VARA remains to be clarified.
The CBUAE Regulation applies to anyone offering or engaging in Payment Token Services in the UAE (excluding the DIFC or ADGM, collectively known as the Financial Free Zones). The VARA Rules and Regulations apply to all virtual assets and related activities in Dubai (excluding the DIFC). The CMA Regulation applies to parties in the UAE issuing security tokens and commodity token contracts. It does not apply to virtual assets or real-world assets (unless tokenised real-world assets represent securities). Practical guidance from CMA on its interpretation and scope is awaited.
Under CBUAE Regulation, a ‘Payment Token’ is defined as a virtual asset maintaining a stable value by referencing (or pegging to) the value of a fiat currency or another Payment Token denominated in the fiat currency.
The CBUAE Regulation recognises two types of Payment Tokens. These are the Dirham Payment Token, which is pegged to the Dirham or its Payment Token equivalent, and the foreign Payment Token, which is pegged to a foreign fiat currency (excluding the Dirham) or its Payment Token equivalent.
Under VARA Rules and Regulations, the following stablecoins are considered virtual assets:
- Fiat-Referenced Virtual Assets (FRVAs): Virtual assets whose value derives from one or more fiat currencies or other FRVAs.
- Asset-Referenced Virtual Assets (ARVAs): Virtual assets whose value derives from real-world assets.
The following Payment Tokens are exempt from CBUAE licensing and/or approval:
- Payment Tokens used for reward schemes such as supermarket loyalty programs.
- Payment Tokens used for bonus schemes like airline miles and customer loyalty schemes where the Payment Token is not redeemable for cash.
- Payment Tokens usable only for non-financial goods or services provided by the issuer.
Under VARA Rules and Regulations, FRVAs do not include stablecoins pegged to the Dirham, which are regulated by CBUAE. These virtual assets are not legal tender in the UAE and are not used as payment for goods or services. This allows CBUAE Regulation and VARA Rules and Regulations to address different types of stablecoins.
Under CBUAE Regulation, entities wishing to carry out the following services must apply for a CBUAE license (Payment Token Services):
- Payment Token Issuing: The first sale or transfer of a Payment Token. Only licensed Payment Token issuers may issue Dirham Payment Tokens to UAE residents.
- Payment Token Custody and Transfer: Safeguarding, administering, receiving, holding, and transferring Payment Tokens on behalf of customers.
- Payment Token Conversion: Selling or buying Payment Tokens for remuneration by spot conversion as principal or agent.
Under VARA Rules and Regulations, the following services related to virtual assets (including FRVAs and ARVAs) are regulated: advisory; broker-dealer services; category 1 virtual asset issuance (for FRVAs and ARVAs); custody; exchange; lending and borrowing; management and investment; and transfer and settlement.
Under CBUAE Regulation, entities providing Payment Token Services must apply for one or more of the following license categories: Dirham Payment Token issuer; Payment Token Custodian and Transferor; or Payment Token Conversion.
Entities outside the UAE offering Payment Token Services for Foreign Payment Tokens must apply for registrations and/or approvals from CBUAE, depending on the specific service.
Under VARA Rules and Regulations, a license is required to conduct virtual asset activities in Dubai, and promoting any virtual asset or related activity without the necessary licenses and/or approvals from VARA is prohibited.
Under CBUAE Regulation, to promote Payment Token Services, an entity must be either duly licensed and/or registered by CBUAE to provide the Payment Token Service it is promoting; or appointed to promote the Payment Token Service on behalf of a duly licensed and/or registered Payment Token Service provider. If neither precondition applies, the entity cannot promote Payment Token Services.