UAE's Zand Stablecoin Cements Digital Dirham Leadership in Global Fintech Race

The UAE's Zand Bank has secured regulatory approval to launch a dirham-backed stablecoin, marking a significant step in the nation's push to integrate digital currencies into its financial infrastructure. The stablecoin, named Zand AED, is fully backed by one-to-one AED reserves held in segregated, regulated accounts and operates on multiple public blockchains. This move positions Zand as the second digital bank in the UAE to offer a regulated stablecoin, following Mbank's AE Coin launch in 2024. The initiative, led by Zand Trust-a wholly owned subsidiary of Zand Bank- aims to bridge traditional finance and decentralized systems while maintaining compliance with UAE Central Bank regulations.

The stablecoin's launch coincides with the UAE's broader digital finance ambitions. Just days prior, the country completed its first government transaction using the Digital Dirham, a central bank digital currency (CBDC), via the mBridge platform according to reports. The transaction, executed between the Ministry of Finance and the Dubai Department of Finance, was finalized in under two minutes, showcasing the efficiency of the nation's evolving digital infrastructure. Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, UAE Minister of Finance, called it "a pivotal milestone in the history of government financial transformation," emphasizing its role in enhancing transparency and operational efficiency.

Zand AED's introduction aligns with the UAE's strategic focus on regulatory clarity for digital assets. Since March 2023, the Central Bank has mandated that stablecoins be fully backed by high-quality liquid assets and undergo rigorous auditing. The Zand AED's real-time transparency-ensured through independently audited smart contracts and reserve attestations-reflects this commitment. Zand's Chairman, Mohamed Alabbar, described the stablecoin as "a breakthrough for the UAE," reinforcing the nation's position as a global leader in financial innovation. CEO Michael Chan added that the stablecoin serves as a "bridge between traditional finance and decentralized finance," unlocking opportunities in tokenization and cross-border payments.

The timing of Zand's launch also raises questions about Tether's delayed AED-backed stablecoin, which was previously in development with Phoenix Group. Despite the UAE's regulatory progress, Tether has yet to secure approval for its offering, highlighting the competitive landscape in the region's stablecoin market. Meanwhile, the UAE's pilot of its Digital Dirham CBDC among governmental entities-set for a full launch by 2025 signals a broader push to digitize the national currency.

The government's adoption of the Digital Dirham underscores its role as a strategic pillar in the UAE's digital economy. The Central Bank of the UAE's FIT Programme, which supports the initiative, aims to accelerate digital payments across public and private sectors. Sheikh Mansour bin Zayed, chairman of the Central Bank, emphasized that the Digital Dirham is a "strategic pillar" for building an integrated digital economy.

Zand AED and the Digital Dirham pilot demonstrate a dual approach: leveraging blockchain for cross-border efficiency while maintaining regulatory oversight. With Tether's absence and the rapid growth of digital asset markets, the UAE's regulatory clarity could attract further institutional adoption, positioning it as a hub for next-generation financial infrastructure.