Digital guarantees and payment settlement4 Sandbox experiments using blockchain-based documentation and stablecoins to save time and cut costs in payments showed promise. Traditional cross-border payment and settlement systems remain among the most persistent bottlenecks in international trade. Despite advances in technology, these systems continue to be characterized by high costs, long processing times and limited transparency. The main challenges include: –Cross-border payment frictions: International payments typically involve multiple intermediaries, resulting in settlement times of three to five days and transaction fees ranging from 2% to 5% of the total value. These inefficiencies disproportionately impact SMEs and businesses in emerging markets, where banking relationships are less established and correspondent banking networks are contracting. –Capital inefficiency: During the settlement window, capital remains idle, generating no returns and creating liquidity bottlenecks throughout the supply chain. This prolonged parking of working capital particularly affects businesses with tight margins and limited access to additional financing. –Bank guarantee complexity: The UAE alone holds approximately AED 463 billion ($126 billion)5 in outstanding bank guarantees as of 2024, the majority of which are still managed through manual, paper-based processes. The current system could expose parties to significant risks including fraud, document loss and unnecessary administrative costs while locking up capital that could otherwise be deployed productively. Emerging technologies, including stablecoins and blockchain-based documentation, offer promising alternatives to traditional banking infrastructure. These solutions can potentially cut settlement times from days to minutes, dramatically reduce transaction costs and introduce new levels of transparency and programmability to trade finance. Medad Holdings entered the sandbox to test the viability of its Overlay (OvUSD) solution – a yield- bearing, programmable stablecoin issued on Ethereum and Stellar – as a tool for modernizing cross-border trade transactions. The company aimed to demonstrate whether a regulated digital asset could effectively address the significant pain points in traditional trade settlement while generating continuous yield for users. Testing was conducted in collaboration with the FSRA in the ADGM and a network of institutional partners. Over a three-month period, Medad piloted OvUSD in four distinct trade finance use cases: –Invoice payments via SAP digital currency hub: Medad integrated OvUSD with SAP’s enterprise financial system to enable automated settlement of commercial invoices between buyers and sellers. Upon payment initiation, OvUSD was instantly transferred, eliminating delays and reliance on correspondent banking channels. This demonstrated how programmable stablecoins can be embedded within enterprise resource planning (ERP) systems to modernize treasury operations and reduce settlement times from days to minutes. –Foreign exchange (FX) conversion via GMO-Z.com: In partnership with GMO-Z. com, Medad showcased the use of OvUSD for on-chain FX conversion. The pilot enabled seamless currency exchange and cross-border payments using blockchain rails – bypassing 4.1 Medad Holdings: Stablecoin-based trade settlement Advancing Digital Trade: Insights from the UAE TradeTech Regulatory Sandbox 19

Advancing Digital Trade 2025