Stablecoin

A stablecoin is a type of cryptocurrency that attempts to hold a fixed value relative to a specified asset - typically a fiat currency such as the US dollar. Rather than floating freely like Bitcoin or Ether, a stablecoin uses stabilisation mechanisms such as reserve assets held in custody or algorithmic supply adjustments to keep its price steady. According to the Bank for International Settlements, as of July 2025, 90% of the stablecoin market capitalisation was concentrated in two tokens: Tether (USDT) and USD Coin (USDC). Approximately 95% of all stablecoins are backed by fiat currency reserves, and 97% of those fiat-backed stablecoins are denominated in US dollars.\n\nThe regulatory landscape for stablecoins is evolving rapidly. In the United States, the CFTC issued Staff Letter 25-40 establishing a no-action position on payment stablecoins, subsequently revised to clarify that national trust banks are permitted issuers. The US Office of the Comptroller of the Currency (OCC) issued proposed rules in February 2026 to implement the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), which sets out reserve requirements, permissible activities, and prohibitions - including a ban on the payment of interest or yield to holders. In the GCC, Gulf-based investors should consult the relevant local regulator - such as the DFSA in the Dubai International Financial Centre - before treating stablecoins as cash equivalents or investment instruments.\n\nThe Bank for International Settlements has noted that stablecoins can be attractive as a means of accessing the US dollar as a store of value, particularly in markets where the local currency is vulnerable. However, the BIS also flags meaningful cyber and operational risks that differ from those faced by traditional banks. Stablecoins are not equivalent to bank deposits; they are not covered by conventional deposit protection schemes and their reserve backing varies by issuer.

For English-speaking expats in the GCC, stablecoins are frequently encountered as a settlement layer on crypto exchanges or as a way to hold US dollar exposure outside the traditional banking system. Because the UAE dirham and several other GCC currencies are pegged to the US dollar, USD-denominated stablecoins may appear operationally convenient. However, expats should note that stablecoins are not the same as holding US dollars in a regulated bank account - reserve quality, issuer solvency, and custodial arrangements vary significantly between tokens.\n\nAs of early 2026, no GCC-wide stablecoin regulatory framework exists. The DFSA in the Dubai International Financial Centre has published rules covering certain crypto tokens, and investors should check the DFSA's accepted crypto token register before using any stablecoin through a DFSA-regulated firm. Residents in other GCC jurisdictions should refer to their relevant central bank or securities regulator for current guidance. Given that the GENIUS Act in the US explicitly prohibits stablecoin issuers from paying interest or yield, expats should be cautious of any product that markets a stablecoin as a yield-bearing savings instrument.