Beneath the volatility and speculation that once defined the cryptocurrency market, a quieter transformation is taking shape across the Middle East. Stablecoins — digital tokens pegged to currencies such as the US dollar or UAE dirham — are increasingly emerging as the preferred infrastructure for cross-border money movement.
In a region shaped by large expatriate populations, heavy remittance flows, expanding trade networks, and rapidly growing digital banking adoption, stablecoins are moving beyond theory and into practical financial use.
While bitcoin and other cryptocurrencies continue to carry high-risk perceptions, stablecoins are gaining traction among institutions that previously kept their distance from the crypto sector. Banks, regulators, fintech firms, and payment providers are now exploring stablecoins as faster and more cost-effective alternatives for international transactions.
Industry observers say the digital asset sector is entering a more mature phase, shifting away from speculative trading and toward financial infrastructure.
Rahul Kumar, Head of Digital Assets MENA, says the first wave of crypto adoption was largely fueled by volatility, which made cryptocurrencies unsuitable for everyday financial activity.
“Crypto’s initial wave was driven by price volatility, and the same characteristic that attracted speculative interest also made it impractical for everyday financial use,” Kumar says.
He explains that stablecoins serve a different purpose altogether.
“They function as a settlement asset for institutions, a common value layer that different platforms and wallets can plug into, and a practical payment rail for end users, all without the price swings.”
According to Capital.com MENA, global stablecoin transaction volumes reached nearly $30 trillion in 2024, while remittance payments conducted through stablecoin networks are already reducing the costs traditionally associated with cross-border transfers.
Major regional institutions are taking notice. Last year, IHC, ADQ, and First Abu Dhabi Bank announced plans for a dirham-backed stablecoin that would be issued by FAB and regulated by the UAE Central Bank.
Earlier this year, the Central Bank of the UAE approved the country’s first US dollar-backed stablecoin, USDU, under its Payment Token Services Regulation. The token is issued by Universal Digital, a crypto company regulated by the Financial Services Regulatory Authority at Abu Dhabi Global Market.
Kumar says the growing institutional focus on stablecoins reflects a broader shift in how digital assets are being viewed.
“It is less about instruments for speculation, and more about regulated financial infrastructure that solves real operational problems, particularly where settlement is slow, fragmented, and cross-border,” he says.
Reece Merrick, Managing Director for the Middle East and Africa at Ripple, says stablecoins represent an evolution in the practical use of blockchain technology.
“We’re seeing less a shift away from crypto, and more an evolution toward real-world utility for digital assets,” Merrick says. “Businesses and financial institutions are increasingly focused on how blockchain technology can solve practical challenges around payments, settlement, liquidity, and the movement of value globally.”
Tackling Crypto’s Volatility Problem
Cryptocurrencies were originally promoted as alternatives to traditional financial systems, but extreme price swings limited their effectiveness as a medium of exchange. Stablecoins attempt to solve that problem by tying their value to established currencies, most commonly the US dollar.
“A stablecoin is a digital token designed to maintain a stable value, typically by being pegged one-to-one to a reference currency,” Kumar explains. “The important distinction is not the label but rather what sits behind it.”
That distinction has become increasingly important as not all stablecoins carry the same level of financial risk.
“An algorithmic or poorly backed token may carry the same name but a very different risk profile,” Kumar adds. “The real task is separating robust designs from everything that simply shares the same label.”
Regulatory oversight is also reshaping perceptions of stablecoins among both consumers and financial institutions.
Tarek Soubra, Chief Technology Officer at Al Maryah Community Bank, says regulation is transforming stablecoins from speculative crypto products into regulated financial instruments.
“The question is no longer only about price volatility,” Soubra says. “It is now about reserve backing, redemption rights, compliance, and regulatory supervision.”
However, he notes that broader public adoption will still require stronger consumer confidence.
“People need assurance that UAE-regulated stablecoins are safe, linked to real currencies, fully backed by reserves, and operating within a regulated ecosystem,” he says.
The UAE has become one of the region’s most active digital asset hubs, with regulators introducing frameworks around tokenized finance, virtual assets, and stablecoin issuance. Earlier this year, Al Maryah Community Bank also worked on an AED-pegged stablecoin regulated by the UAE Central Bank.
Soubra believes regulation will ultimately determine whether stablecoins transition from crypto-native communities into mainstream finance.
“As our stablecoin is regulated by the Central Bank of the UAE, which requires issuers to maintain 100% reserves before minting tokens, this provides users with confidence that their holdings are properly backed and protected,” he says.
Cross-Border Payments Drive Momentum
For many institutions, the strongest business case for stablecoins lies not in crypto trading, but in payments.
International money transfers remain expensive and slow in many parts of the world, particularly along remittance corridors. Traditional cross-border payments often rely on lengthy correspondent banking chains involving multiple intermediaries, settlement windows, and processing fees.
Stablecoins compress much of that process into blockchain-based transactions that operate around the clock.
Still, the sector faces ongoing challenges. Regulators globally continue to debate issues around reserve transparency, consumer protection, cross-border oversight, and the possibility that privately issued digital currencies could eventually centralize financial power among a small number of platforms.
Fragmentation also remains a concern, as multiple stablecoins compete across different blockchain networks and regulatory frameworks.
Despite these risks, financial institutions increasingly appear willing to accept the trade-off in exchange for faster and cheaper settlement.
Merrick says stablecoins are beginning to address long-standing inefficiencies in global payments.
“Traditional international payments often involve multiple intermediaries, pre-funded accounts, settlement delays, and high operational costs,” he says. “Stablecoins can reduce much of that friction by enabling near-instant settlement, improving liquidity management, and increasing transparency across payment flows.”
Soubra highlights another advantage: uninterrupted availability.
“Stablecoins operate 24/7 regardless of transaction value,” he says. “This has enabled entirely new use cases. Visa, for example, now allows issuing and acquiring banks to settle obligations fully in stablecoins, 365 days a year.”
He adds that stablecoins combine the speed, transparency, and programmability of digital assets without exposing users to the extreme volatility associated with cryptocurrencies.
“These features have enabled stablecoins to expand into payments, settlement, trade finance, and other financial services,” Soubra says.
The Middle East has become a particularly important market because of its large expatriate workforce, growing remittance activity, and expanding digital banking sector.
“The biggest opportunity is in regulated cross-border payments, remittances, merchant settlement, and business-to-business transfers,” Soubra says.
Kumar points to the rapid growth of regional crypto activity as evidence of increasing demand.
“The UAE economy received more than $56 billion in crypto inflows during the 2024–2025 reporting period, growing 33% year-on-year,” he says.
Much of that activity, Kumar adds, is linked to cross-border value transfers — an area where stablecoins are increasingly outperforming legacy payment systems.
Traditional remittance fees often range between 3% and 6% of the transfer amount, while stablecoin-based payment rails can reduce those costs significantly.
“These are not theoretical gains,” Kumar says. “They reflect real users solving real problems with real money.”
Herve Francois, Head of Digital Assets Investments at SC Ventures and SBI Holdings joint venture, says the infrastructure side of stablecoins is becoming increasingly attractive to financial institutions.
“Payments infrastructure may sound less exciting than speculative trading,” Francois says, “but this is where the largest transaction volumes and revenues exist, which explains the growing interest from banks and fintech firms.”
Banks Begin Embracing Stablecoin Infrastructure
For years, most traditional banks remained cautious toward cryptocurrencies. That stance is now beginning to shift as stablecoins start resembling familiar financial infrastructure rather than speculative assets.
“Cryptocurrencies are still widely viewed as higher-risk assets,” Soubra says. “But regulated stablecoins are becoming increasingly accepted because of their growing use cases in payments, remittances, settlements, and trade finance.”
Regulatory clarity is accelerating that transition.
“Approximately 13% of financial institutions and corporates globally are already using stablecoins, while more than half of non-users expect adoption within the next six to 12 months,” Kumar says.
“What has changed is not the technology itself, but the environment around it. Regulators in key jurisdictions are now establishing clear expectations around reserve assets, disclosures, and redemption rights.”
That shift could have major implications for the banking industry, particularly as stablecoins expand into areas traditionally dominated by banks.
A recent report by Standard Chartered estimated that as much as $1 trillion could move from emerging-market bank deposits into stablecoins by 2028 as adoption accelerates in cross-border payments and digital savings.
The debate now centers on whether stablecoins are competitors to banks — or simply the next evolution of financial infrastructure.
“Stablecoins are not necessarily replacing traditional banking infrastructure,” Soubra says. “They are modernizing how value moves within it.”
Francois warns that banks risk losing relevance if they fail to engage with the technology.
“If banks ignore the shift, stablecoins could put pressure on deposits, payment flows, and client relationships,” he says. “But if banks participate responsibly, this becomes an opportunity to build entirely new services around digital money, custody, tokenization, treasury, and settlement.”
Unlike decentralized cryptocurrencies designed to operate independently of financial systems, regulated stablecoins increasingly rely on reserve management, licensing frameworks, compliance structures, and integration with existing financial institutions.
Utility Over Speculation
For most consumers, the mechanics of payment infrastructure matter far less than the outcome. What matters is whether money moves quickly, affordably, and reliably.
That practical utility may ultimately define the future of stablecoins.
“What we are seeing is a shift in what people actually need from digital assets,” Kumar says. “Speculation still exists, but alongside it there is a growing demand for practical utility that allows value to move quickly, affordably, and reliably.”
He believes the long-term value of digital assets may come less from market speculation and more from the infrastructure powering financial transactions behind the scenes.
“The most durable value in digital assets is not in price speculation,” Kumar says. “It is in the rails themselves. The future likely involves digital assets becoming invisible to everyday users — seamlessly embedded, rigorously governed, and delivering value quietly in the background.”
Merrick agrees that the next chapter of digital finance will likely depend less on speculative trading and more on invisible infrastructure supporting global commerce.
“Stablecoins are clearly emerging as an important part of global financial infrastructure,” he says. “Particularly in payments, settlement, and liquidity management, because they solve very real operational challenges for businesses and institutions.”
