Cryptocurrency firm Tether announced Wednesday that it will introduce a new stablecoin pegged to the United Arab Emirates (UAE) dirham, aiming to meet rising demand for Gulf currencies and provide alternatives to the U.S. dollar.
Stablecoins, which are digital tokens designed to maintain a stable value by being backed by traditional currencies like the U.S. dollar or euro, have surged in popularity. They are widely used for payments and trading in cryptocurrencies such as Bitcoin outside the regulated banking sector.
Currently, Tether issues the largest stablecoin globally—the USDT, pegged to the U.S. dollar and valued at approximately $1. With a market capitalization of about $117 billion, USDT represents a significant portion of the $169 billion stablecoin market, as reported by CoinGecko.
Tether CEO Paolo Ardoino highlighted the strategic intent behind the new dirham-pegged stablecoin during a Dubai event, emphasizing its role in offering an alternative to the U.S. dollar. Ardoino expressed optimism that the dirham could become a favored currency as global trade dynamics evolve. He noted considerable interest in holding AED (dirham) outside the UAE, attributing this to the stability and security of the UAE’s financial system.
The UAE’s dirham is currently pegged to the U.S. dollar, and the UAE is positioning itself as a global crypto hub amid rising economic competition in the Gulf. The country has facilitated cryptocurrency payments in sectors like real estate and education, which has increased adoption and transaction volumes while developing regulatory frameworks in Abu Dhabi and Dubai.
In addition to its dirham-pegged stablecoin, Tether offers stablecoins linked to the euro, Chinese yuan, Mexican peso, and gold. Despite the growing popularity of stablecoins, regulators have expressed concerns about the associated market risks, including potential impacts on the broader financial system if large-scale conversions of stablecoins back into traditional currencies occur.
Ardoino also mentioned in an April interview that Tether’s recent growth is largely driven by its use as a dollar alternative in emerging markets such as Argentina, Brazil, Turkey, Vietnam, and parts of Africa, where the U.S. dollar may be scarce.
The new dirham-pegged stablecoin will be fully backed by UAE-based reserves, according to Tether’s statement. It will be launched in collaboration with Abu Dhabi-based cryptomining and blockchain firm Phoenix Group, with additional support from investment firm Green Acorn Investment. The stablecoin aims to enhance international trade and remittances, lower transaction costs, and provide a hedge against currency fluctuations. The exact launch date remains unspecified, and Ardoino indicated that licensing from the UAE Central Bank could take several months. Phoenix Group’s CEO Seyed Mohammad Alizadehfard also noted that the blockchain platform for the stablecoin has yet to be selected.
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