Tether to Launch Dirham-Pegged Stablecoin

By Federico Maccioni and Catherine Cartier

DUBAI (Reuters) – Cryptocurrency company Tether announced on Wednesday its plans to launch a new stablecoin pegged to the United Arab Emirates (UAE) dirham, tapping into demand for the Gulf currency and providing an alternative to the U.S. dollar.

Stablecoins are digital tokens designed to maintain a constant value backed by traditional currencies such as the U.S. dollar or euro. They have experienced rapid growth as a payment method and among traders buying and selling cryptocurrencies like bitcoin outside of regulated banks.

Tether operates the world’s largest stablecoin with its dollar-pegged token (USDT), designed to maintain a value of $1. The approximately $117 billion in circulation constitutes the majority of the $169 billion stablecoin market, according to CoinGecko data.

“The main purpose is actually creating an optionality towards the U.S. dollar,” said Tether CEO Paolo Ardoino regarding the proposed dirham-pegged unit during an event in Dubai, noting that he believes the dirham will become a preferred currency as global trade evolves. He highlighted a significant interest in holding AED (dirham) outside of the UAE due to the nation’s stability and solid balance sheet.

The dirham is pegged to the U.S. dollar, similar to most Gulf currencies. The UAE aims to establish itself as a global cryptocurrency hub as competition heats up in the Gulf region. It quickly enabled cryptocurrency payments in sectors like real estate and education, boosting adoption rates and transaction volumes while developing virtual asset regulation in both Abu Dhabi and Dubai.

Tether also offers stablecoins pegged to the euro, China’s yuan, the Mexican peso, and even gold.

Regulators have expressed concerns about the market risks associated with the adoption of crypto assets. They worry that increasing stablecoin reserves could expose the wider financial system to greater risks, with the U.S. warning about potential rapid outflows if holders rush to convert tokens into traditional currencies.

FOCUS ON EMERGING MARKETS

In April, Ardoino shared with Reuters that Tether’s recent growth has primarily originated from its role as an alternative to the dollar in emerging markets such as Argentina, Brazil, Turkey, Vietnam, and regions in Africa, where the dollar may be less accessible.

Tether stated that the dirham stablecoin will be “fully backed” by liquid UAE-based reserves. It will be launched in collaboration with Abu Dhabi-listed cryptomining and blockchain firm Phoenix Group and with support from investment company Green Acorn Investment, both companies confirmed.

The new stablecoin aims to “streamline international trade and remittances, reduce transaction fees, and provide a hedge against currency fluctuations,” according to their statement. While no launch date has been given, Ardoino mentioned that obtaining a license from the UAE Central Bank might take a few months.

Phoenix Group Co-founder and CEO Seyed Mohammad Alizadehfard also indicated that the blockchain platform supporting the stablecoin has not yet been chosen.