Digital Dirham, Tokenised Deposits and Stablecoins: The Coming Competition for GCC Settlement Rails

The UAE’s Digital Dirham strategy is now part of a much broader transformation of the country’s financial infrastructure. CBDC development forms part of the Central Bank of the UAE’s Financial Infrastructure Transformation programme, which covers wholesale and retail digital currency as well as cross-border settlement. In parallel, the UAE has established a dedicated Payment Token Services Regulation covering the issuance, conversion, custody and transfer of payment tokens under central bank supervision, while work has also begun on an integrated conventional and digital Central Securities Depository platform for government debt and Sukuk.

Having worked in digital assets for more than a decade, I see these developments as an important shift in the conversation with institutions. Banks, treasurers and market infrastructures are increasingly focused on which form of regulated digital money fits a particular settlement need, how it behaves from a balance-sheet and risk perspective, and how it connects with the banking, treasury and market-infrastructure systems they already operate.

Three Forms of Digital Money Are Taking Shape

In my view, the GCC will support several settlement models in parallel. Sovereign CBDCs, bank-issued tokenised deposits and regulated stablecoins have different issuers, legal structures and balance-sheet characteristics, and those differences will influence how they are used across securities settlement, cross-border trade, treasury liquidity, collateral and commercial payments.

Tokenised deposits have a natural advantage in institutional markets because they extend a form of money that banks, treasurers and regulators already understand. As the Bank for International Settlements explains, tokenised deposits remain liabilities of the issuing commercial bank while being represented on a programmable or tokenised ledger. For institutions, that means the instrument can be assessed through an existing commercial banking relationship and through familiar frameworks for credit, liquidity, treasury and control.

CBDCs bring a different set of characteristics because they are liabilities of the central bank. In wholesale markets, that can be particularly relevant where institutions require settlement in central bank money and a high degree of certainty around finality; the BIS describes central bank money as the anchor for ultimate settlement finality in the monetary system.

Stablecoins bring broader portability across platforms and jurisdictions, particularly where counterparties operate across different banking networks. Their institutional role is becoming easier to assess as regulatory frameworks develop, while their legal and balance-sheet characteristics remain distinct from bank deposits, a distinction the BIS has highlighted in its comparison of stablecoins and tokenised deposits.

Which Rail Could Become the Institutional Default?

Based on what we are seeing in the markets we work in, I think bank-issued tokenised deposits will account for a significant share of institutional settlement over the next five years. They create a relatively direct connection between the regulated banking system and tokenised markets, and we are already seeing that direction reflected in initiatives such as the six Canadian banks jointly exploring a Canadian-dollar tokenised deposit solution for transfers between financial institutions.

The reason is primarily balance-sheet related. Tokenised deposits are commercial bank liabilities issued within the existing banking and regulatory framework, and institutions can assess them through considerations they already use every day: credit exposure, liquidity treatment, treasury returns, controls, auditability and the relationship with the issuing bank. In my experience, those considerations carry as much weight as the technology when a regulated institution decides which form of money it is prepared to use for settlement.

I also see the tokenisation discussion moving deeper into capital markets infrastructure, where securities, money and collateral have to move in a coordinated way and where digital rails need to connect cleanly with the regulated financial system. That puts institutional design at the centre of the work, because any settlement rail has to meet established requirements for security, compliance, privacy, governance, resilience and integration before it can support meaningful volume.

Stablecoins will continue to play an important role, particularly where cross-border reach or portability is valuable. In the UAE, the Central Bank’s payment-token framework gives institutions a clearer regulatory basis for assessing privately issued digital money, while Bahrain has taken a similar direction through its stablecoin issuance framework. From what I observe in the region, clearer regulation is already changing the quality of the institutional discussion around these instruments.

CBDCs are naturally relevant where central bank money is preferred, particularly in interbank and cross-border settlement. The CBUAE’s mBridge materials describe the use of CBDCs for international transfers between participating banks on distributed ledger technology, while Europe is pursuing a related objective through Pontes, which is designed to enable DLT-based wholesale transactions to settle in central bank money through the Eurosystem.

Across all three models, settlement design will determine how far institutions are prepared to go. The BIS framework for delivery versus payment explains the importance of linking the asset and payment sides of a securities transaction to reduce principal risk, while more recent work such as Project Agorá has shown how tokenised commercial bank deposits and tokenised central bank reserves can support atomic settlement in wholesale cross-border payments. After ten years in this market, I think this is where institutional adoption becomes very tangible: the asset can move, the money can move, and both movements can be controlled within one reliable process.

What Infrastructure Has to Get Right

A digital asset depository or settlement platform earns institutional trust when bank treasuries, risk teams and operations teams can recognise positions held on it within their normal operating and balance-sheet framework. In practice, that means the infrastructure has to satisfy the standards of control, finality, accountability and integration that institutions already apply to established market infrastructure.

Finality and Auditability

Transaction finality is one of the first requirements because every transaction needs a clear and provable outcome, with records that can be reconstructed afterwards by the institution, its auditors and, where relevant, its regulator. Once a system is in production, the operating model has to show clearly whether a transaction has settled, failed or remains outstanding, and that state has to remain auditable after the event.

Delivery Versus Payment

The payment side carries the same importance as the asset side. Where both are tokenised, the infrastructure should support delivery versus payment so that the transfer of the security and the corresponding payment are linked. The BIS notes that DvP is designed to reduce the risk of one party delivering an asset before receiving the corresponding payment. Where payment remains in fiat, digital asset infrastructure should connect with existing settlement rails in a way that allows institutions to retain the systems and processes that continue to serve them effectively.

Compliance, Custody and Control

Compliance needs to be applied within the transaction flow before settlement, with eligibility rules, transfer restrictions and other relevant controls checked before value moves. Custody should remain clearly separated from the market infrastructure, with control of keys staying with the institution or its chosen custodian and the digital asset platform connecting into that arrangement. In the institutional deployments I have seen, this separation supports clearer accountability while allowing issuance, settlement and servicing processes to be coordinated across the asset lifecycle.

CBDCs, Stablecoins and Tokenised Deposits Will Coexist in Different Parts of the Market

I expect these forms of money to coexist across different parts of the market. CBDCs are likely to be used where central bank money is preferred, including government and interbank settlement. Tokenised deposits will remain closely connected to commercial banking, treasury activity and balance-sheet management, while stablecoins will continue to expand where portability, broader reach and cross-border use are valuable. Their relative importance will be shaped by regulation, liquidity, integration and, ultimately, the use cases that institutions choose to take into production.

We can already see this taking shape in the GCC, where regulators are building frameworks around several forms of digital money at the same time. That gives banks and market infrastructures room to determine which instrument fits a particular transaction while keeping the activity within a supervised financial framework, and I think that flexibility will be important as the market develops.

What Would Show Which Rail Is Gaining Ground?

Over the next twelve months, I would pay particular attention to how these instruments begin to appear in normal treasury, settlement and collateral activity. A government bond or Sukuk settling through a digital depository on a T+0 basis, with the payment side also on-ledger or tightly integrated and a bank treasury treating the resulting position as part of its normal inventory, would be a strong indication that tokenised settlement is becoming part of day-to-day institutional use.

Another useful indicator would be banks beginning to report tokenised deposit balances in their regular financial disclosures, because that would show these instruments becoming part of normal treasury activity. I would also watch collateral closely. If institutions begin moving government securities intraday against tokenised deposits, including in repo and cross-border transactions, that would show the infrastructure supporting use cases that are directly relevant to liquidity and balance-sheet management.

Interoperability will influence adoption as banks connect their internal environments with external blockchain-based markets and use digital forms of money to settle tokenised securities, funds and other financial instruments across different platforms and networks. From the conversations we have with institutions, control remains central: they want custody, compliance, permissions and systems of record to remain governed within their operating model while new infrastructure extends what those systems can do.

For stablecoins and CBDCs, I would look at the same measure we use for any financial infrastructure: sustained institutional usage. Stablecoins already have meaningful adoption in digital markets, while CBDCs are at an earlier stage of development in many jurisdictions. Their respective roles will become more visible as central bank digital money enters regular interbank and cross-border settlement and as the regulatory treatment of private digital money becomes more established.

From where I sit, the next phase of digital money in the GCC will be shaped by usage, regulation, liquidity, interoperability and institutional trust. CBDCs, stablecoins and tokenised deposits can each play a credible role, and over time institutions will favour the models that integrate cleanly with their operating environment while meeting the standards they already apply to money, securities and settlement.