ABU DHABI PROPOSES FRAMEWORK FOR FIAT-REFERENCED TOKENS

Last updated: June 19, 2025, 18:31 | Written by: Charlie Shrem

In a move that solidifies its position as a forward-thinking hub for digital assets, Abu Dhabi is taking significant strides toward regulating fiat-referenced tokens (FRTs). The Financial Services Regulatory Authority (FSRA) has introduced a regulatory framework for the issuance of Fiat-Referenced Tokens (FRTs) in ADGM, expanding the suite of digital assets that can be offered in a regulated environment.The Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) has introduced a proposed regulatory framework designed to govern the issuance and supervision of these increasingly popular stablecoins.This framework, outlined in Consultation Paper No. 7 of 2025, represents a major step in aligning the ADGM with global best practices in stablecoin regulation and crypto asset compliance.But what exactly are FRTs, and why is Abu Dhabi so keen on regulating them?This article will delve into the intricacies of the proposed framework, explore the implications for the digital asset landscape, and examine Abu Dhabi’s growing role as a key player in the global crypto economy.Get ready to explore the future of finance, right here in the UAE!

Understanding Fiat-Referenced Tokens (FRTs)

Before diving into the details of the proposed framework, it's crucial to understand what fiat-referenced tokens are and how they function.Simply put, FRTs are a type of stablecoin designed to maintain a stable value by being pegged to a fiat currency, such as the US dollar or the Euro. Opened consultation on Regulatory Framework for the issuance of Fiat-Referenced Tokens On, the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) opened a consultation on a proposal for a Regulatory Framework for the issuance of Fiat-Referenced Tokens (FRT) until .This peg is typically achieved by holding reserves of the underlying fiat currency equivalent to the number of FRTs in circulation.

Here’s a breakdown of the key characteristics of FRTs:

Stable Value: The primary goal of an FRT is to maintain a stable value relative to its reference fiat currency.This stability makes them attractive for use in everyday transactions and as a store of value.
Fiat-Backed: FRTs are backed by reserves of the fiat currency to which they are pegged. In response to increasing interest from stakeholders, Abu Dhabi s Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) is taking significant steps to regulate fiat-referenced tokens (FRTs), a category of stablecoins. This move is aimed at strengthening the legal framework surrounding digital assets andThis backing is intended to ensure that each token can be redeemed for its equivalent value in the underlying fiat currency.
Digital Representation: FRTs are digital representations of fiat currency, leveraging blockchain technology for efficient and transparent transfers.

Example: Imagine a stablecoin called ""AbuDhabiDollar"" (ADD) which is pegged to the UAE Dirham at a 1:1 ratio.For every ADD in circulation, the issuer would hold one UAE Dirham in reserve.This ensures that holders of ADD can always redeem their tokens for the equivalent amount of Dirhams.

Why Regulate FRTs?

The regulation of FRTs is essential for several reasons:

Consumer Protection: A robust regulatory framework protects consumers by ensuring that FRTs are backed by adequate reserves and that issuers adhere to strict operational standards.
Financial Stability: Proper regulation mitigates the risks that FRTs could pose to the broader financial system, such as the potential for instability if a large issuer were to fail.
Combating Illicit Finance: Regulations help to prevent the use of FRTs for money laundering and other illicit activities by requiring issuers to implement robust anti-money laundering (AML) and counter-terrorism financing (CTF) measures.
Innovation and Growth: A clear and well-defined regulatory framework provides clarity for businesses and investors, fostering innovation and growth in the digital asset space.

The FSRA's Proposed Regulatory Framework for FRTs

The FSRA's proposed regulatory framework for FRTs in the ADGM is comprehensive and addresses various aspects of their issuance, governance, and oversight.The framework aims to provide a clear and consistent set of rules that promote responsible innovation and protect consumers and the financial system.

Here are some of the key components of the proposed framework:

Licensing Requirements: Issuers of FRTs will be required to obtain a license from the FSRA to operate within the ADGM. Abu Dhabi s financial regulator plans to supervise fiat-referenced tokens (FRTs), a type of stablecoin, in response to calls from stakeholders seeking its issuance. The regulator has invitedThis licensing process will involve a thorough assessment of the applicant's financial stability, operational capabilities, and compliance procedures.
Reserve Requirements: A cornerstone of the framework is the requirement for issuers to maintain a one-to-one reserve of the fiat currency to which the tokens are pegged.This means that for every FRT in circulation, the issuer must hold an equivalent amount of the underlying fiat currency in a secure and segregated account.
Custody Requirements: The framework will likely specify requirements for the custody of the fiat currency reserves backing FRTs.This may involve using regulated custodians to ensure the safety and security of the reserves.
AML/CTF Compliance: Issuers will be required to implement robust anti-money laundering (AML) and counter-terrorism financing (CTF) procedures to prevent the use of FRTs for illicit activities. Ripple s Request To Stay $125M Judgement Granted, Hinting At Potential SEC Appeal In Long-Running XRP LawsuitThis will include conducting Know Your Customer (KYC) checks on users and monitoring transactions for suspicious activity.
Disclosure Requirements: Issuers will be required to provide clear and transparent disclosures to users about the risks associated with FRTs, the composition of the reserves backing the tokens, and the issuer's operational policies.
Redemption Rights: The framework will likely ensure that holders of FRTs have the right to redeem their tokens for the equivalent value in the underlying fiat currency upon demand.
Ongoing Supervision: The FSRA will conduct ongoing supervision of FRT issuers to ensure that they are complying with the regulatory requirements and maintaining the integrity of the system.

Benefits of the New Framework

The introduction of this framework promises to bring about several benefits to Abu Dhabi's financial ecosystem and the broader cryptocurrency market.

Enhanced Investor Protection: By mandating strict reserve requirements and robust AML/CTF compliance, the framework provides enhanced protection for investors and users of FRTs.
Increased Market Confidence: A clear and well-defined regulatory framework fosters trust and confidence in the market, encouraging greater adoption of FRTs.
Attracting Investment: The ADGM's forward-thinking approach to regulation can attract businesses and investors looking for a stable and predictable environment to operate in.
Promoting Innovation: By providing a clear path for the responsible development and deployment of FRTs, the framework can foster innovation in the digital asset space.
Global Recognition: Aligning with global best practices in stablecoin regulation positions the ADGM as a leading jurisdiction for digital assets.

Impact on the UAE's Crypto Hub Ambitions

The proposed regulatory framework for FRTs is a significant step in realizing the UAE's ambitions to become a leading crypto hub.The UAE has been actively promoting the development of its digital asset ecosystem, and the introduction of this framework demonstrates its commitment to providing a safe and regulated environment for businesses and investors.

The regulation of FRTs complements other initiatives undertaken by the UAE to support the growth of the digital asset industry, such as:

The establishment of regulatory sandboxes to allow companies to test innovative products and services in a controlled environment.
The issuance of regulations for other types of digital assets, such as security tokens and utility tokens.
The development of a national blockchain strategy to promote the adoption of blockchain technology across various sectors.

By creating a comprehensive and well-regulated digital asset ecosystem, the UAE is positioning itself as a destination of choice for businesses and investors in the crypto space.

Addressing Potential Challenges

While the proposed framework offers numerous benefits, it's important to acknowledge potential challenges that may arise during implementation.

Compliance Costs: The regulatory requirements, particularly the reserve requirements and AML/CTF compliance, may impose significant costs on FRT issuers.
Enforcement Challenges: Ensuring compliance with the regulations will require effective enforcement mechanisms and ongoing supervision by the FSRA.
Competition: The ADGM will need to compete with other jurisdictions that are also developing regulatory frameworks for stablecoins.
Technological Developments: The regulatory framework will need to be flexible enough to adapt to rapidly evolving technological developments in the digital asset space.

To address these challenges, the FSRA will need to work closely with industry stakeholders to ensure that the regulations are practical, effective, and adaptable to the changing landscape.

Public Consultation and Next Steps

The FSRA's Consultation Paper No. 7 of 2025 invites public feedback and comments on the proposed regulatory framework. The proposed framework for fiat-referenced tokens in Abu Dhabi is comprehensive, addressing various aspects of their issuance, governance, and oversight. One of the key components of the framework is the requirement for issuers of stablecoins to maintain a one-to-one reserve of the fiat currency to which the tokens are pegged. This ensures thatThis consultation period is crucial for gathering input from industry participants, experts, and other stakeholders to ensure that the framework is well-informed and reflects the needs of the market.

The FSRA has requested feedback on various aspects of the proposed framework, including:

The scope of the regulations and the definition of FRTs.
The licensing requirements for FRT issuers.
The reserve requirements for FRTs.
The AML/CTF compliance requirements for FRTs.
The disclosure requirements for FRTs.

After the consultation period closes, the FSRA will review the feedback received and finalize the regulatory framework. Abu Dhabi s FSRA plans to supervise fiat-referenced tokens (FRTs) and has opened a public consultation. Learn about the proposed framework, FRT definitions, and the UAE's growing role as a crypto hub.The final framework is expected to be published in the coming months and will provide a clear and comprehensive set of rules for the issuance and supervision of FRTs in the ADGM.

The Future of Stablecoins in Abu Dhabi and Beyond

Abu Dhabi's proactive approach to regulating fiat-referenced tokens signals a bright future for stablecoins and the wider digital asset ecosystem in the region. Abu Dhabi is advancing the regulation of fiat-referenced tokens (FRTs) with a new framework. Public feedback for the proposal is invited until October 3 after which, FSRA will finalize. Abu Dhabi is taking significant steps towards regulating fiat-referenced tokens (FRTs), a specific type of stablecoin.As the regulatory framework matures, it is expected to foster greater adoption of FRTs for various use cases, including:

Cross-border payments: FRTs can facilitate faster, cheaper, and more efficient cross-border payments compared to traditional methods.
Remittances: FRTs can provide a more accessible and affordable way for individuals to send money to family and friends abroad.
E-commerce: FRTs can be used as a stable and reliable payment method for online transactions.
Decentralized finance (DeFi): FRTs can be used as collateral in DeFi protocols, enabling users to access a wide range of financial services.

The success of Abu Dhabi's regulatory framework for FRTs could also serve as a model for other jurisdictions looking to regulate stablecoins and foster innovation in the digital asset space.

FAQ: Fiat-Referenced Tokens in Abu Dhabi

What are the benefits of using Fiat-Referenced Tokens?

FRTs offer several advantages, including price stability compared to other cryptocurrencies, faster and cheaper transactions than traditional financial systems, and increased accessibility to financial services for those who are unbanked or underbanked.

How does the FSRA's framework protect consumers?

The FSRA's proposed framework includes several safeguards to protect consumers, such as requiring FRT issuers to maintain a one-to-one reserve of fiat currency, implementing robust AML/CTF procedures, and providing clear and transparent disclosures about the risks associated with FRTs.

Who will be affected by these new regulations?

These regulations will primarily affect companies looking to issue FRTs within the ADGM, but will also impact consumers and businesses who use these tokens for transactions and investments. Abu Dhabi s financial regulator plans to supervise fiat-referenced tokens (FRTs), a type of stablecoin, in response to calls from stakeholders seeking its issuance. The regulator has invited public feedback on a proposed regulatory framework.The goal is to create a safer, more transparent, and more reliable environment for all stakeholders.

When will the proposed framework come into effect?

The FSRA has concluded the public consultation period and is expected to finalize the regulatory framework in the near future.The exact date of implementation will be announced once the final framework is published.

Conclusion: Abu Dhabi's Pioneering Role in Stablecoin Regulation

Abu Dhabi's proposed regulatory framework for fiat-referenced tokens (FRTs) marks a significant milestone in the development of the digital asset industry. The FSRA's proposed regulatory framework for fiat-referenced tokens (FRTs) represents a a major step forward in aligning the Abu Dhabi Global Market (ADGM) with global best practices in stablecoin regulation and crypto asset compliance.By embracing innovation while prioritizing consumer protection and financial stability, the FSRA is setting a new standard for stablecoin regulation. Abu Dhabi s Financial Services Regulatory Authority (FSRA) has introduced a proposed regulatory framework for fiat-referenced tokens (FRTs), a type of stablecoin backed by liquid assets denominated in the same currency as the token.This initiative not only solidifies Abu Dhabi's position as a leading crypto hub but also contributes to the broader evolution of the global financial system.The move to regulate FRTs signals Abu Dhabi's commitment to building a robust and transparent digital economy, attracting investment and fostering innovation in the rapidly evolving world of digital assets. Abu Dhabi s financial regulator plans to supervise fiat-referenced tokens (FRTs), a type of stablecoin, in response to calls from stakeholders seeking its issuance. The regulator has invited public feedback on a proposed regulatory framework. The Financial Services Regulatory Authority (FSRA) of thKeep an eye on the ADGM – it's a space where the future of finance is being actively shaped. Abu Dhabi financial regulatory authority plans to regulate the fiat reference token (FRT), which is a stablecoin, in response to calls from stakeholders toAre you ready to explore the possibilities? fiat currency referred to in (b) from its issuer upon demand. 6. A summary of the treatment of digital assets relevant to the consideration of FRTs, as reflected in the current VA Guidance, is set out below. Proposed Fiat-Referenced Token regulatory frameworkConsider researching opportunities within the ADGM and participating in the ongoing dialogue surrounding digital asset regulation.