Arthur D. Little: UAE emerges as a global frontrunner in stablecoins
The UAE is emerging as a global leader and innovator in stablecoins, with the nation positioning itself at the forefront of stablecoin growth and efforts to develop local-currency alternatives to US dollar-backed stablecoins, according to a global benchmark by Arthur D. Little.
A stablecoin is a cryptocurrency designed to maintain a stable value, usually by being pegged to a traditional currency such as the US dollar. Examples of stablecoins include USDT (Tether) and USDC (USD Coin), which have been designed to maintain their value at around $1 per coin.
According to the Arthur D. Little report, USD-backed tokens account for approximately 97% of the roughly $312 billion fiat-backed stablecoin market. However, non-USD alternatives are expanding rapidly, with unique holders of non-USD stablecoins increasing 2,900% between January 2023 and February 2026 to reach 1.2 million.
The report argues that this does not signal the displacement of the US dollar. Instead, different currencies and instruments are likely to play different roles: dollar-backed stablecoins retaining a powerful position in international settlement, while sovereign-sponsored and local-currency instruments increasingly compete for domestic and regional payment flows.
The report describes this emerging trend as “replication”, or governments responding to the growth of dollar stablecoins by creating credible, regulated alternatives of their own.
In this segment of the stablecoin market, the report finds that the Gulf Cooperation Council (GCC) is particularly well positioned. For Gulf economies with currencies pegged to the US dollar, local-currency stablecoins can potentially combine dollar-linked economic stability with domestic regulatory oversight and locally held reserves.
The UAE’s two-layer strategy
For the UAE, stablecoins create an opportunity for dirham-backed digital money to play a role beyond domestic transactions. Following the establishment of the Middle East’s first comprehensive regulatory framework for fiat-referenced tokens in 2024, the UAE has seen regulated dollar-backed stablecoins develop alongside a dirham-denominated layer, including the launch of DDSC, backed by International Holding Company, Sirius International Holding and First Abu Dhabi Bank.
“The UAE’s approach represents a deliberate two-layer strategy,” said Arjun Vir Singh, Partner at Arthur D. Little. “The UAE is demonstrating that dollar stablecoins and a domestic digital currency ecosystem do not have to be competing choices. Global instruments can continue to serve international flows, while a regulated dirham layer can support domestic and regional activity.”
“This positions the UAE not simply as an adopter of digital finance, but as a market helping define how regulated digital money can coexist across different layers of the financial system.”
Implications for financial institutions
The report argues that financial institutions should no longer treat stablecoins as a single market. Instead, an emerging architecture spanning domestic, regional and international payments could see different forms of digital money serve distinct purposes.
Arthur D. Little identifies the regional payment layer – including trade, remittances and cross-border transactions – as a significant area still open to competition, with potential for UAE-based infrastructure across intra-GCC flows and trade corridors connecting the Gulf with Africa and South Asia.
For incumbent banks, the shift presents both an opportunity and a competitive challenge. Institutions will need to determine where they intend to participate as banks, fintechs and infrastructure providers compete to establish the customer-facing, settlement and cross-border layers of the emerging ecosystem.
“For banks and payment players, the question is no longer simply whether to participate in stablecoins. It is which currency, which payment layer, which client and which corridor they want to serve. The regional layer remains particularly open, creating an opportunity for the UAE and wider GCC to shape how value moves across some of the world’s most important trade corridors,” noted Mohammad Nikkar, Principal at Arthur D. Little.
