Cryptocurrency company Tether announced on Wednesday its intention to introduce a new stablecoin pegged to the United Arab Emirates (UAE) dirham, aiming to cater to growing demand for Gulf currencies and diversify beyond the U.S. dollar. This move reflects Tether’s strategy to offer more currency alternatives in the rapidly evolving stablecoin market.

Stablecoins, digital tokens designed to maintain a stable value by being backed by traditional currencies like the U.S. dollar or euro, have gained significant traction. They are increasingly used for payments and trading cryptocurrencies such as bitcoin, providing a way to operate outside traditional banking systems. Tether is known for its dollar-pegged stablecoin (USDT), which is the largest in the world, with approximately $117 billion in circulation, representing a major portion of the $169 billion stablecoin market, according to CoinGecko data.

Tether CEO Paolo Ardoino highlighted that the new dirham-pegged stablecoin aims to provide an alternative to the U.S. dollar. “The main purpose is actually creating an optionality towards the U.S. dollar,” Ardoino said during an event in Dubai. He expressed confidence that the dirham would become a preferred currency as global trade evolves, noting significant interest in holding AED (dirham) outside of the UAE due to the stability and strength of the UAE’s financial system.

The UAE has been actively working to establish itself as a global crypto hub amid rising economic competition in the Gulf region. The country has facilitated cryptocurrency payments in sectors such as real estate and education, which has increased adoption rates and transaction volumes while developing regulatory frameworks in both Abu Dhabi and Dubai.

Tether, which also offers stablecoins pegged to the euro, China’s yuan, the Mexican peso, and gold, has seen significant growth in transaction-based revenue, which surged 69% to $327 million, exceeding expectations. However, there are concerns from regulators about the potential risks associated with the adoption of crypto assets and stablecoins, particularly regarding their impact on the broader financial system.

Ardoino previously noted that Tether’s expansion into emerging markets like Argentina, Brazil, Turkey, Vietnam, and parts of Africa has been driven by the need for alternatives to the dollar. The new dirham-pegged stablecoin will be “fully backed” by liquid UAE-based reserves and is being developed in collaboration with Abu Dhabi-listed cryptomining and blockchain firm Phoenix Group and with support from Green Acorn Investment.

The stablecoin aims to enhance international trade and remittances, reduce transaction fees, and provide protection against currency fluctuations. While a specific launch date has not been provided, Ardoino mentioned that obtaining licensing from the UAE Central Bank would take a few months, and the blockchain platform supporting the stablecoin has not yet been determined.

(Adapted from BusinessTimes.ocm.sg)

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