Shaping the Future of Stable Payments: ADGM’s Consultation on Fiat-Referenced Tokens (FRTs)

The global financial system is at a turning point. Digital assets are no longer confined to speculative trading—they are reshaping how payments, settlement, and financial services operate. Among them, Fiat-Referenced Tokens (FRTs), commonly known as stablecoins, stand out for their potential to combine the efficiency of blockchain with the reliability of traditional money.

Recognising both their potential and associated risks, the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has issued Consultation Paper No. 9 of 2025, setting out a comprehensive regulatory framework for activities involving Fiat-Referenced Tokens (FRTs). This paper represents a turning point in the UAE’s digital asset regulatory journey, reflecting ADGM’s ambition to position itself as a global hub for safe, transparent, and innovative financial markets.

This consultation follows prior work, notably Consultation Paper No. 7 of 2024 on the issuance of FRTs and Consultation Paper No. 11 of 2024 on the broader digital asset framework, showing ADGM is layering oversight progressively across its regulatory architecture.

Why This Matters Now

In 2024, ADGM introduced a framework for the issuance of FRTs, distinguishing them from other virtual assets (VAs) by recognising their role as a stable medium of exchange rather than speculative investments. However, with growing adoption and new business models emerging, regulators saw the need to expand oversight beyond issuance.

The 2025 consultation paper builds on this foundation by addressing custody, payments, intermediation, and acceptance criteria for foreign FRTs. The FSRA’s proposals aim to balance market innovation with risk mitigation, particularly in areas such as anti-money laundering (AML), consumer protection, and financial stability.

The consultation explicitly proposes amendments to several core rulebooks (FSMR, FEES, COBS, PRU, and GLO), underscoring that this is not just a new set of rules but a fundamental integration of FRT oversight into ADGM’s regulatory fabric.

Key Highlights of the Proposed Framework

1. Acceptance of FRTs

The FSRA will maintain a list of Accepted FRTs. While FRTs issued within ADGM will be automatically accepted, foreign-issued tokens will undergo rigorous assessment based on criteria such as:

a) Alignment with the FRT definition (must reference a single fiat currency).

b) Traceability and AML monitoring capabilities.

c) Adequacy of reserves backing the token.

d) Jurisdictional standards of the issuer.

This ensures that only credible, transparent, and compliant stablecoins enter the ADGM ecosystem.

2. Expansion of Regulated Activities

The scope of regulated activities is being broadened to reflect evolving market practices:

a) Custody of FRTs: Custodians will now be formally regulated, aligning FRTs with global best practices.

b) Payment Services: Service providers using FRTs must meet conduct requirements similar to fiat-based payment providers.

c) FRT Intermediation: A new regulated activity, covering firms that buy and sell FRTs either as principals or agents.

This approach recognises that FRTs are not just a tool for settlement but also liquid assets that can underpin new financial services models.

3. Safeguarding Client Assets

Broker-dealers, asset managers, and custodians handling client FRTs must comply with Safe Custody Rules, including:

a) Segregation of client accounts.

b) Transparent disclosure of custody arrangements.

c) Frequent reconciliation and reporting.

This mirrors the stringent safeguards applied to virtual assets, reinforcing investor confidence.

The FSRA is also consulting on governance, audit, and stress-testing obligations for custodians and intermediaries, ensuring client assets remain secure even in stressed market conditions.

4. Payments in FRTs

Authorised firms may accept FRTs as payment for their services, provided they are on the Accepted FRT list. This effectively positions stablecoins as mainstream settlement instruments within ADGM.

This could accelerate cross-border remittances and institutional settlement use cases, but raises questions about interoperability with payment regimes outside ADGM (e.g., DIFC, EU, or US systems).

5. Issuance Restrictions

While issuance of FRTs in foreign currencies remains permissible, the FSRA proposes a restriction on Dirham-denominated FRTs, aligning with the Central Bank of the UAE’s position.

This reinforces the UAE Dirham’s role as a sovereign currency shielded from private issuance risks.

Implications for the Market

The proposed framework carries significant implications for the digital assets’ ecosystem in the UAE and beyond.

For issuers, the criteria for “Accepted FRTs” provide a clear roadmap for designing compliant stablecoins backed by transparent reserves and effective AML standards.

For custodians and intermediaries, the inclusion of FRTs within the regulatory perimeter means they can now offer custody, settlement, and trading services under a recognised framework, enhancing credibility with institutional clients.

For payment providers, the ability to use FRTs for regulated payment services marks a breakthrough in mainstream adoption.

Stablecoins are no longer confined to crypto exchanges—they are entering the financial system as practical instruments for remittances, cross-border settlements, and retail payments.

By setting prudential and conduct requirements, the FSRA is ensuring that such services are delivered safely, with consumer protection at the core.

At a macro level, the framework strengthens the UAE’s role as a regional financial hub, aligning with international debates on stablecoin oversight.

It demonstrates that FRTs can operate within a regulated environment that prioritises transparency, trust, and systemic resilience.

Looking Ahead

The deadline for public comments is 7 October 2025, after which the FSRA will finalise its rules.

If implemented, these proposals could serve as a global benchmark for stablecoin regulation, influencing policymakers far beyond the UAE.

In an era where trust and stability are paramount, ADGM’s proactive stance on FRTs shows that the UAE is not just keeping pace with digital finance, but leading the way.