In brief
- The CBUAE's Payment Token Services Regulation (Circular No. 2/2024), effective July 2024, classifies stablecoins such as USDT and USDC as virtual assets rather than legal tender, with direct consequences for how companies hold and use them.
- RAK ICC entities may hold stablecoins for proprietary treasury purposes; any facilitation of third-party payments without a CBUAE licence constitutes unlicensed financial activity.
- Under IFRS, corporate stablecoin holdings are recorded as intangible assets under IAS 38, not as cash equivalents, and yield earned through DeFi protocols is subject to UAE corporate tax.
Businesses holding USDT, USDC, or other stablecoins through a RAK International Corporate Centre (RAK ICC) entity face a structured compliance environment that many treasury managers haven't yet fully addressed. The Central Bank of the UAE (CBUAE) published the Payment Token Services Regulation (the PTSR) in Circular No. 2/2024, effective July 2024, and its practical reach extends well beyond licensed service providers. Any company that crosses into payment facilitation for third parties, misclassifies stablecoin holdings on its balance sheet, or maintains an inadequate audit trail faces genuine regulatory exposure. What the PTSR says about holding stablecoins as a corporate treasury asset Under the PTSR, stablecoins are classified as Payment Tokens, a category of virtual asset designed to maintain a stable value by referencing fiat currency. In the UAE, only the Dirham (AED) constitutes legal tender. Stablecoins don't qualify, regardless of their peg or collateralisation model. A RAK ICC entity can't use USDT or USDC to settle direct obligations with UAE mainland counterparties (rent, utility bills, domestic suppliers) unless the payer or recipient holds a CBUAE licence for Payment Token Services. The PTSR regulates three core activities: Payment Token Issuance, Payment Token Conversion, and Payment Token Custody and Transfer. A company holding its own stablecoins as a proprietary treasury asset, without providing services to third parties, generally falls outside the PTSR's licensing perimeter. But 'proprietary holding' has clear limits. The PTSR applies within the CBUAE's onshore jurisdiction; the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) operate under separate frameworks through the Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA) respectively. The regulation also prohibits algorithmic stablecoins and privacy tokens entirely. No UAE person may issue or provide services relating to them. For RAK ICC treasury managers using major fiat-backed stablecoins such as USDC or USDT, the immediate concern isn't issuance; it's ensuring that treasury activity doesn't cross into regulated Payment Token Services. Where the line sits between treasury holder and regulated service provider The most significant compliance risk for a RAK ICC treasury is the transition from holder to provider. Under the Retail Payment Services and Card Schemes Regulation, providing payment services for third parties is a regulated activity requiring a CBUAE licence. A company holding USDT for its own international trade or proprietary investment isn't engaged in regulated activity. A company that begins accepting USDT from customers to settle invoices on behalf of group entities, or that moves stablecoins between third parties, crosses into Money Services Business territory. The consequences of operating as a Payment Service Provider without authorisation are serious. Administrative fines of up to AED 5 million are available under federal banking law, and the 2025 AML amendments lowered the evidentiary threshold for establishing money laundering offences to a standard of objective inference. A bank or regulator can treat circumstantial evidence of unlicensed facilitation as sufficient to trigger enforcement action; intent no longer needs to be proved directly. How IFRS requires stablecoins to be recorded on the balance sheet Despite their name, stablecoins aren't 'Cash and Cash Equivalents' under IAS 7. The prevailing accounting treatment for corporate stablecoin holdings in 2026 is as intangible assets under IAS 38 (Intangible Assets). Holdings are initially recorded at cost; subsequent measurement may use the Revaluation Model where an active market exists, with gains recorded in Other Comprehensive Income (OCI). Where a RAK ICC entity acts as a broker-trader (holding stablecoins for sale in the ordinary course of business) the holdings are recorded as inventory under IAS 2, measured at the lower of cost or net realisable value. The practical distinction matters for tax and audit purposes: IAS 38 treatment requires impairment testing, so any de-pegging event, even a temporary one, must be documented and the fair value assessed against the carrying amount. Under IAS 21, Dirham-to-USD fluctuations must also be reflected at the closing rate on each reporting date. Every RAK ICC entity holding stablecoins should have a documented valuation policy covering these requirements. The absence of professionally maintained, IFRS-compliant books of accounts is treated by the Federal Tax Authority (FTA) as evidence of inadequate governance, a problem that compounds during banking due diligence and annual audits. AML due diligence requirements for treasury operations Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism (the AML Law), as amended, governs AML obligations for UAE businesses dealing in virtual assets. For a RAK ICC treasury to be defensible during a 2026 audit, the company should maintain a Treasury Policy Manual covering three specific areas. First, wallet hygiene: the treasury should document that all stablecoins were sourced from regulated Virtual Asset Service Providers (VASPs) operating under recognised licences, rather than unhosted peer-to-peer desks where counterparty identity is unknown. Second, on-chain analytics: integration of blockchain analytics tools to verify that incoming stablecoins haven't interacted with sanctioned addresses or high-risk protocols. Third, a clear audit trail linking the initial fiat capital injection to the current stablecoin balance; this forms the 'source of funds' narrative that banks and auditors require. Banks operating under the CBUAE's National Fraud Strategy have moved from static Know Your Customer (KYC) checks to behavioural compliance monitoring. A company that receives a large USDT-to-fiat transfer without an established source-of-funds narrative will find its account suspended while the bank investigates. That isn't because a crime has been committed; it's because the bank's systems have identified an unexplained pattern. Corporate tax treatment of stablecoin yield Under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the Corporate Tax Law), a RAK ICC entity is a taxable person. The standard corporate tax rate of 9% applies once taxable income exceeds AED 375,000 per tax period; income below this threshold is taxed at 0%. Where a company's revenue remains below AED 3 million, Small Business Relief (currently extended through the end of 2026) allows election for nil taxable income treatment, subject to registration and compliance requirements. Yield earned on stablecoins through lending protocols or DeFi platforms is taxable revenue under the Corporate Tax Law. This can't be structured around. For high-net-worth individuals holding a treasury through a RAK ICC Foundation, Article 17 of the Corporate Tax Law provides a route to fiscal transparency: the Foundation may apply to the FTA to be treated as an Unincorporated Partnership, with income attributed directly to the individual beneficiaries. Since personal investment income is generally not subject to corporate tax in the UAE, this structure preserves a low-tax profile while maintaining the governance protections of a Foundation. Choosing between RAK ICC and RAKEZ for treasury purposes The choice of entity depends on the intended use of the treasury and the banking access required. A RAK ICC entity is an offshore vehicle well-suited to passive holding, wealth preservation, and proprietary investment. It has no physical office requirement and lower annual renewal costs, but banks treat it as a high-risk offshore profile; obtaining a local operational account for an active trading treasury is challenging without additional substance. A Ras Al Khaimah Economic Zone (RAKEZ) Free Zone Limited Liability Company (FZ-LLC) requires a physical office, sponsors residency visas, and carries the banking profile of an onshore entity. It's the right structure for active treasury operations that require regular fiat conversion and institutional-grade banking access. The combination of both (a RAK ICC Foundation as the privacy and holding layer, and a RAKEZ branch as the operational management entity) provides the most complete architecture: offshore asset protection with the onshore substance that Tier-1 banks require. Feature RAK ICC (Offshore) RAKEZ (Free Zone) Primary use Passive holding and wealth preservation Active trading and operating capital Physical office Not required Mandatory Banking profile Offshore; higher scrutiny Onshore; standard PTSR interaction Generally exempt (proprietary use) May require NOC if volume is high Compliance level Minimal but precise Full Economic Substance required What companies should do before the next compliance review Three actions are most important for RAK ICC entities holding stablecoins as a treasury asset. First, confirm that all stablecoin activity stays within proprietary holding: no third-party payment facilitation, no acceptance of stablecoins from clients to settle obligations for other entities. Second, ensure the IFRS classification and valuation policy is documented, with a clear distinction between the intangible asset treatment under IAS 38 and the inventory treatment under IAS 2 where applicable. Third, establish a Treasury Policy Manual that provides the source-of-funds narrative, wallet hygiene records, and on-chain analytics integration that banks and auditors will require. Any entity earning yield on stablecoin holdings should review its corporate tax registration and consider whether the Article 17 election is available and appropriate. The CBUAE is expected to publish further guidance on the PTSR's application to corporate treasury holders during 2026 as the regulation matures; companies should monitor the CBUAE's official publications for updates. For guidance on structuring a compliant stablecoin treasury within a RAK ICC or RAKEZ entity, or for assistance drafting a Treasury Policy Manual, contact the Alldren Corporate Finance team at [email protected].
This article is for general informational purposes only and does not constitute legal advice. Readers should seek professional advice tailored to their specific circumstances. Information is current as of the publication date and may be subject to change. This article addresses UAE law; different rules may apply in other jurisdictions within the UAE.
