In July 2025, the Central Bank of Bahrain published the Gulf Cooperation Council's first comprehensive Stablecoin Issuance and Offering (SIO) framework. Five months later, RAKBANK received in-principle approval from the Central Bank of the UAE to issue a dirham-backed stablecoin, and AE Coin - the first live AED stablecoin - was already being accepted at merchant terminals through Network International's point-of-sale and e-commerce infrastructure. Dubai's Department of Finance had completed a pilot of crypto payments for government services.

These are not speculative developments or pilot announcements. Stablecoins in the Gulf have crossed the threshold from regulatory sandboxes into live payment infrastructure. For payment practitioners, the question is no longer whether GCC stablecoins will affect the payment market but how quickly the regulatory frameworks solidify and what they mean for existing payment rails.

Bahrain's SIO Framework: Setting the Regional Standard

Bahrain's SIO framework, supervised by the Central Bank of Bahrain, establishes a licensing regime that covers the full stablecoin lifecycle: issuance, custody, wallet provision, and payment facilitation. The framework draws explicitly from the EU's Markets in Crypto-Assets Regulation (MiCA), FATF recommendations, FSB guidance, and NIST cybersecurity standards - positioning it as one of the most internationally aligned stablecoin regulatory frameworks globally.

Key requirements include:

Full reserve backing: Stablecoins must be backed 1:1 by fiat currency reserves held in segregated, regulated accounts. Issuers must publish regular reserve attestations.

Licensing requirements: Separate licence categories for issuers, custodians, wallet providers, and payment facilitators. Each category has distinct capital, governance, and operational requirements.

Consumer protection: Mandatory redemption rights (holders must be able to exchange stablecoins for fiat at par value at any time), complaint handling procedures, and disclosure requirements.

Multi-currency support: Unlike some frameworks that restrict stablecoins to the domestic currency, Bahrain's SIO framework allows stablecoins linked to several fiat currencies, opening the door to USD-backed and EUR-backed issuance alongside BHD-backed tokens.

Bahrain's approach is consistent with its broader regulatory strategy: move first, set standards, and position the Kingdom as the GCC's regulatory laboratory. The CBB was the first Gulf regulator to license crypto exchanges (in 2019), the first to establish a comprehensive open banking framework (2018), and now the first to publish stablecoin-specific licensing rules.

UAE: From Regulation to Live Infrastructure

The UAE's approach has been more infrastructure-led. Rather than focusing primarily on the regulatory framework (though that exists via the Payment Token Services Regulation), the UAE has moved quickly to integrate stablecoins into existing payment infrastructure.

The most significant development is RAKBANK's in-principle approval from the CBUAE to issue an AED-backed stablecoin, announced in January 2026. The planned stablecoin will be fully backed 1:1 by UAE dirham reserves held in segregated, regulated accounts. RAKBANK must complete additional regulatory and operational requirements before public launch, but the approval signals that the CBUAE is prepared to let a licensed bank - not just a fintech or crypto-native firm - issue a stablecoin.

This is significant because bank-issued stablecoins carry a fundamentally different risk profile than those issued by crypto-native companies. A CBUAE-licensed bank issuing a stablecoin backed by reserves held in its own regulated accounts represents a hybrid between a bank deposit and a digital token - a construct that blurs the boundary between traditional payment infrastructure and crypto-native rails.

Meanwhile, AE Coin - the first live AED-pegged stablecoin - has already been integrated into Network International's point-of-sale and e-commerce systems. Since January 2026, merchants across the UAE can accept AE Coin at existing payment terminals. Dubai's Department of Finance successfully piloted crypto payments for government services using AE Coin in October 2025.

The Payment Token Services Regulation governs the issuance, conversion, custody, and transfer of stablecoins within the UAE. Critically, stablecoins used for domestic payments must be issued by CBUAE-licensed entities under ongoing supervision. Foreign-issued stablecoins (such as USDT or USDC) can circulate for trading purposes but cannot be used as domestic payment instruments unless issued by a licensed entity.

The Rest of the GCC: Caution and Restriction

Outside Bahrain and the UAE, GCC stablecoin regulation ranges from cautious to restrictive:

Saudi Arabia: SAMA has not published stablecoin-specific regulations. The Kingdom's regulatory focus remains on central bank digital currency (the Digital SAR project with the BIS) and the open banking framework. Stablecoin issuance is not prohibited but operates in a regulatory grey area without clear licensing requirements.

Oman: The Central Bank of Oman has not issued stablecoin regulations and has been generally cautious about crypto assets, though it has not imposed an outright ban.

Qatar: The Qatar Central Bank maintains a restrictive stance toward crypto assets, and stablecoin issuance is effectively not permitted under current regulations.

Kuwait: The Central Bank of Kuwait has been similarly cautious, with no stablecoin framework published.

The GCC is thus splitting into two tiers on stablecoin regulation: Bahrain and the UAE advancing rapidly with comprehensive frameworks and live implementations, while the remaining four member states observe from the sidelines.

Implications for Payment Infrastructure

The emergence of regulated, bank-issued stablecoins in the Gulf creates several practical implications for payment infrastructure:

Merchant acceptance: AE Coin's integration with Network International demonstrates that stablecoins can use existing merchant terminal infrastructure. This means stablecoin payments do not require merchants to adopt new hardware - they flow through the same POS systems that process card and mobile payments. The marginal cost of adding a stablecoin payment method at the terminal level is low.

Settlement efficiency: Card transactions in the UAE currently settle through Jaywan (domestic) or international card networks (Visa, Mastercard) with standard settlement cycles of T+1 or T+2. Stablecoin-based payments can settle on-chain in minutes or seconds, potentially compressing the settlement cycle and reducing the float that acquirers and banks currently manage.

Cross-border potential: Stablecoins pegged to GCC currencies could complement or compete with existing cross-border payment infrastructure. A business in Bahrain paying a supplier in the UAE could use an AED-pegged stablecoin rather than routing through correspondent banking channels. This is speculative at present - cross-border stablecoin payments are not yet established in the Gulf - but the regulatory foundation is being laid.

Competition with instant payments: The UAE's Aani instant payment platform processes domestic real-time payments through central bank infrastructure. Bank-issued stablecoins represent an alternative rail for real-time value transfer that operates outside the central bank's settlement system. Whether the CBUAE views stablecoins as complementary to or competitive with Aani will shape how the regulatory framework evolves.

CBDC interaction: Both the UAE (Digital Dirham) and Bahrain are exploring central bank digital currencies. The relationship between private stablecoins and sovereign digital currencies is undefined in the Gulf. Will bank-issued stablecoins coexist with CBDCs, or will central banks eventually require that private stablecoins settle through CBDC infrastructure? The answer will determine the long-term architecture of digital payments in the region.

The MiCA Parallel

The Gulf's stablecoin regulatory development is happening in parallel with the EU's implementation of MiCA, which has already forced operational changes - most notably the delisting of Tether's USDT across EU exchanges in late 2025. Bahrain's explicit alignment with MiCA principles suggests an awareness that Gulf stablecoin regulation needs to be interoperable with the EU framework for cross-border relevance.

However, the Gulf frameworks differ from MiCA in important ways. MiCA applies uniformly across 27 EU member states; GCC stablecoin regulation is fragmented across six sovereign jurisdictions with no mutual recognition mechanism. MiCA restricts stablecoin usage for payments beyond certain thresholds; the UAE framework is more permissive about payment use. MiCA prohibits interest on stablecoins; the GCC frameworks are silent on this point.

For global payment operators, this means that stablecoin compliance in the Gulf requires a jurisdiction-by-jurisdiction approach - much like the GCC's open banking frameworks, each country has built its own regulatory architecture for what is fundamentally the same technology.

What Practitioners Should Watch

The GCC stablecoin market will evolve significantly through 2026:

RAKBANK launch: The actual launch of RAKBANK's AED stablecoin will be the first bank-issued stablecoin in the Gulf. Its adoption metrics - merchant acceptance, consumer uptake, transaction volumes - will indicate whether bank-issued stablecoins find genuine payment utility or remain a niche product.

CBUAE stablecoin-CBDC policy: How the CBUAE positions stablecoins relative to the Digital Dirham will shape the structural role of private digital money in the UAE's payment ecosystem.

Saudi entry: Any move by SAMA to publish stablecoin-specific regulation would dramatically expand the addressable market and potentially create a Saudi-Bahrain-UAE stablecoin corridor that mirrors the existing payment infrastructure connections.

International issuer licensing: Whether the CBUAE or CBB license international stablecoin issuers (Circle, Paxos, or others) under their frameworks would signal whether the Gulf is building a domestic stablecoin ecosystem or integrating with the global one.

The Gulf is building the regulatory and infrastructure layer for a new form of money - private, digital, fully backed, and operating on payment rails that did not exist five years ago. The speed of implementation in Bahrain and the UAE has outpaced most Western regulators, creating a live laboratory for how stablecoins interact with existing payment infrastructure, central bank digital currencies, and traditional card and instant payment systems.

Sources: Central Bank of Bahrain - Fintech and Innovation; CBUAE Rulebook - Open Finance Regulation; The National - RAKBANK Receives Initial Approval for Dirham-Backed Stablecoin; MENA Fintech Association - Bahrain GCC First Stablecoin Framework; Gulf News - UAE Stablecoin Rules Changing Everyday Payments.