Stablecoin Regulation in the Saudi Market: SAMA Framework for Pegged Digital Payment Instruments

Four SAR-referenced stablecoin issuers now operate under SAMA authorization with SAR 1.2 billion in combined outstanding supply. In late 2025, ministerial remarks signaled that stablecoins may move from research to implementation within a supervised policy framework, with a progressive and risk-aware approach allowing stablecoins to operate within existing regulation. SAMA’s stablecoin regulation, a subset of the broader Payment Token Regulatory Framework, takes a deliberately conservative approach: algorithmic stablecoins are effectively prohibited, 100% reserve backing at Saudi-licensed banks is mandatory, and quarterly proof-of-reserves attestation is required. The framework positions SAR stablecoins as a regulated bridge between traditional banking and the Kingdom’s emerging tokenized securities infrastructure.

Regulatory Classification

SAMA classifies stablecoins into three categories based on their value stabilization mechanism:

Asset-Referenced Stablecoins (Permitted): Tokens that maintain price stability through a reserve of assets (fiat currency, government securities, or central bank deposits). This is the only model SAMA permits for Saudi-market stablecoins.

Algorithmic Stablecoins (Prohibited): Tokens that maintain price stability through automated supply adjustment algorithms without full asset backing. SAMA’s position, articulated in a 2024 circular, states that algorithmic stabilization mechanisms present “unacceptable risks to consumer protection and monetary stability” — a direct response to the TerraUSD collapse. Any entity operating or promoting an algorithmic stablecoin in Saudi Arabia faces enforcement action under SAMA’s financial crime regulations.

Hybrid Stablecoins (Case-by-Case): Tokens that combine partial asset backing with algorithmic mechanisms. SAMA evaluates these on a case-by-case basis but has not yet approved any hybrid model. The regulatory threshold for the “asset-backed” component has been set at a minimum of 100%, effectively requiring hybrid models to maintain full backing regardless of the algorithmic component.

Reserve Management Requirements

Reserve Composition

SAR-referenced stablecoin reserves must be held in:

1. Saudi government securities: Treasury bills and government sukuk with remaining maturity of 12 months or less — maximum 60% of reserves
2. Cash deposits at Saudi-licensed banks: Demand deposits or term deposits with maturity of 30 days or less — minimum 40% of reserves
3. SAMA deposits: Direct deposits at the central bank — permitted without limit but in practice available only to bank-affiliated issuers

The 40% minimum cash deposit requirement ensures that at least 40% of outstanding stablecoins can be redeemed immediately without liquidating securities positions. This provision reflects SAMA’s concern about redemption run scenarios, where rapid large-scale redemption could force fire-sale liquidation of reserve assets.

Reserve Segregation

Reserve assets must be:

• Held in dedicated accounts separate from the issuer’s operational accounts
• Subject to a statutory trust arrangement, ensuring reserve assets are ring-fenced from issuer insolvency
• Not available for lending, pledging, hypothecation, or any purpose other than backing outstanding stablecoins
• Managed by an independent reserve manager (required for issuers with outstanding supply exceeding SAR 500M)

Reserve Attestation

Quarterly proof-of-reserves requirements include:

• Independent auditor attestation (from a SAMA-approved audit firm) confirming reserve value equals or exceeds outstanding stablecoin supply
• Breakdown of reserve composition by asset type, maturity, and custodian
• Confirmation that no reserve assets have been used for lending or pledging during the quarter
• Publication of the attestation summary on the issuer’s website within 15 days of quarter-end

SAMA may require additional ad-hoc attestations during periods of market stress or following material events affecting the issuer.

Authorized SAR Stablecoin Issuers

Four entities hold SAMA stablecoin authorization as of March 2026:

Issuer 1: Bank-Affiliated Stablecoin (SAR 520M outstanding)

• Affiliated with a top-5 Saudi bank
• Primarily used for institutional tokenized securities settlement
• Reserves held 55% in government securities, 45% in cash deposits at the parent bank

Issuer 2: Bank-Affiliated Stablecoin (SAR 380M outstanding)

• Affiliated with a major Saudi bank
• Focused on corporate treasury and cross-border payment applications
• Reserves held at SAMA (direct central bank deposit)

Issuer 3: Fintech Stablecoin (SAR 210M outstanding)

• Independent fintech firm graduated from SAMA sandbox
• Consumer-facing stablecoin for digital payments and e-commerce
• Reserves held at two Saudi banks (diversified custodianship)

Issuer 4: Fintech Stablecoin (SAR 90M outstanding)

• International fintech with Saudi subsidiary
• Multi-use stablecoin targeting both retail payments and DeFi integration
• Reserves held 50% in Saudi T-bills, 50% in cash deposits

Foreign-Denominated Stablecoins

Stablecoins pegged to foreign currencies (primarily USD) face additional SAMA requirements:

• Higher capital: SAR 15M minimum (versus SAR 10M for SAR-referenced)
• FX risk management: Mandatory hedging strategy for any FX exposure, audited quarterly
• Capital flow monitoring: Enhanced reporting on the volume and direction of foreign-denominated stablecoin transfers, addressing SAMA’s concerns about capital outflow
• Reserve location: At least 60% of reserves must be held at Saudi-licensed banks, with the remainder permitted at banks in the currency’s home jurisdiction

One entity currently holds authorization for a USD-denominated stablecoin, primarily serving international tokenized securities settlement where USD is the market convention.

Interaction with Digital Riyal

SAMA has addressed the relationship between private stablecoins and the planned digital riyal CBDC:

Coexistence Policy: SAMA’s current position is that private SAR stablecoins and the digital riyal will coexist, serving complementary functions. The digital riyal will be the central bank-issued risk-free digital payment instrument, while private stablecoins serve specific use cases including tokenized securities settlement, cross-border payments, and programmable payment applications.

Reserve Conversion: Upon digital riyal launch, SAMA may require stablecoin issuers to hold a portion of reserves in digital riyal rather than conventional bank deposits, providing direct central bank backing for private stablecoins.

Redemption Bridge: Stablecoin issuers will be required to support redemption into digital riyal as an alternative to conventional bank deposits, ensuring seamless interoperability between private and central bank digital currencies.

Market Impact and Growth Projections

SAMA projects the Saudi stablecoin market to reach SAR 5-8 billion in outstanding supply by 2028, driven by:

1. Growth in tokenized securities market volume requiring digital settlement media
2. Cross-border payment migration from correspondent banking to stablecoin-based rails
3. Enterprise adoption for B2B payments, particularly in supply chain tokenization
4. Retail adoption through integration with existing digital payment platforms

The SAR stablecoin market’s growth trajectory is closely linked to the broader tokenization ecosystem’s development, as stablecoins serve as the primary digital settlement medium for tokenized asset transactions.

Stablecoins and Tokenized Securities Settlement

SAR stablecoins play a central role in Saudi Arabia’s tokenized securities infrastructure:

Settlement Medium: On Tadawul’s digital securities platform, SAR stablecoins serve as the payment leg of atomic DvP settlement. When a buyer purchases tokenized sukuk or equity tokens, the SAR stablecoin transfer and the security token transfer execute simultaneously on R3 Corda — achieving T+0 settlement in 3-7 seconds.

Profit Distribution: Smart contracts automate periodic profit distributions from tokenized sukuk to holders using SAR stablecoins. This eliminates the manual bank transfer process required for conventional sukuk coupon payments, reducing distribution costs and settlement time from days to seconds.

Institutional Preference: The two bank-affiliated stablecoin issuers (SAR 900M combined outstanding) primarily serve institutional clients — CMA-licensed broker-dealers, custodians, and institutional investors — facilitating wholesale tokenized securities settlement.

AML/CFT Compliance for Stablecoins

Stablecoin activities are subject to SAMA’s full AML/CFT framework for digital financial services:

• Travel Rule: All stablecoin transfers above SAR 3,750 must include originator and beneficiary information, consistent with FATF standards (Saudi Arabia has been a FATF member since 2019)
• Blockchain analytics: Mandatory deployment of SAMA-approved blockchain analytics tools (Chainalysis, Elliptic, or Crystal Blockchain) for real-time transaction screening
• Self-custody wallet controls: Stablecoin transfers to or from unhosted wallets are subject to the tiered verification requirements — including source-of-funds documentation for transfers above SAR 15,000
• STR filing: Suspicious transaction reports must be filed with SAFIU within 24 hours. Stablecoin issuers filed 127 STRs in 2025, representing 14% of all digital financial services STRs
• Sanctions screening: Real-time sanctions screening of all wallet addresses against UN, US (OFAC), EU, and Saudi domestic sanctions lists

International Stablecoin Considerations

Saudi Arabia’s stablecoin framework must address the global stablecoin landscape:

Tether (USDT) and Circle (USDC): The two largest global stablecoins are not SAMA-authorized for use in Saudi Arabia. While individual holdings are not prohibited (similar to the self-custody regulatory position), SAMA-licensed entities cannot promote, distribute, or facilitate trading of non-authorized stablecoins. CMA-licensed tokenized securities platforms cannot use non-authorized stablecoins for settlement.

Cross-Border Stablecoin Use: SAMA’s cross-border payment innovation program includes stablecoin-based corridors as one of four technology approaches under development. Licensed SAR stablecoin operators may facilitate cross-border payments subject to SAMA’s FX regulations and AML/CFT requirements.

MiCA and International Alignment: Saudi Arabia’s stablecoin regulation shares common principles with the EU’s MiCA regulation — 100% reserve backing, algorithmic stablecoin prohibition, and consumer protection requirements. This alignment facilitates potential international regulatory cooperation and mutual recognition.

Sharia Considerations for Stablecoins

SAR stablecoins used in the Islamic fintech ecosystem require specific Sharia compliance considerations:

• Reserve composition: Reserves held in interest-bearing instruments (government bonds) versus non-interest-bearing deposits affect Sharia classification. Stablecoins with reserves held entirely in Sharia-compliant instruments (Islamic government sukuk, non-interest deposits) may be marketed as Sharia-compliant
• Yield distribution: If stablecoin reserves generate income (from government securities or bank deposits), the treatment of that income — retained by the issuer or distributed to holders — has Sharia implications. Distribution to holders could reclassify the stablecoin as a securities product requiring CMA authorization
• Trading status: Stablecoins that maintain 1:1 SAR peg are treated as currency equivalents under Sharia, permitting their use in all transactions where SAR cash would be permissible

Risk Factors

Stablecoin-specific risks identified by SAMA:

1. De-peg risk: Despite 100% reserve backing, market stress scenarios could create temporary de-peg events if redemption demand exceeds liquidity. The 40% minimum cash reserve requirement mitigates but does not eliminate this risk
2. Custodian risk: Reserve assets are held at Saudi-licensed banks. Bank failure — while unlikely given Saudi banking sector stability — would expose stablecoin reserves to loss. Edaa’s custodian-of-last-resort mechanism does not currently extend to stablecoin reserves
3. Technology risk: Smart contract vulnerabilities, blockchain protocol failures, or cybersecurity breaches could disrupt stablecoin operations. Annual smart contract audits mitigate but do not eliminate technology risk
4. Regulatory risk: SAMA retains the right to revoke stablecoin authorization or modify reserve requirements at any time. The digital riyal CBDC launch could alter the competitive landscape for private stablecoins

Stablecoin Governance and Operational Standards

SAMA imposes governance requirements on all authorized stablecoin issuers:

Board Composition: Stablecoin issuers must maintain a board of directors with at least one independent director experienced in financial services regulation and one director with technology/cybersecurity expertise. Board-affiliated stablecoin issuers may use the parent bank’s board with a dedicated stablecoin governance committee.

Key Personnel: Mandatory roles include Chief Compliance Officer, Chief Technology Officer, and Money Laundering Reporting Officer — each requiring SAMA fitness-and-propriety approval. Personnel changes in these roles must be notified to SAMA within 5 business days, with replacements appointed within 30 days.

Operational Resilience: Business continuity plans must address scenarios including complete DLT infrastructure failure, bank custodian insolvency, and mass redemption events. Annual tabletop exercises testing these scenarios must be documented and results reported to SAMA. Recovery time objectives for critical systems must not exceed 4 hours.

Incident Reporting: Material operational incidents — including smart contract vulnerabilities, reserve composition breaches, unauthorized minting or burning, and cybersecurity breaches — must be reported to SAMA within 2 hours of detection. Public disclosure is required within 24 hours for incidents affecting customer assets or stablecoin peg stability.

Audit Trail: All minting, burning, and reserve management activities must maintain immutable audit trails accessible to SAMA on demand. The audit trail must capture the authorization chain (who approved the operation), the timestamp, the amount, and the resulting reserve position.

Resources

• Payment Token Regulatory Framework — Comprehensive payment token regulation
• Digital Riyal CBDC — Central bank digital currency
• AML/CFT Compliance — Stablecoin compliance
• Self-Custody Position — Unhosted wallet controls
• Cross-Border Payments — Stablecoin corridors
• SAMA Fintech Sandbox — Authorization pathway
• Blockchain Settlement Infrastructure — Settlement architecture

Related network sites: Saudi Tokenized Real Estate | Dubai Tokenisation | UAE Tokenization Regulations | Capital Tokenization

For stablecoin licensing inquiries: info@sauditokenisation.com