DUBAI (Aug 21): Cryptocurrency firm Tether said on Wednesday it is launching a new stablecoin pegged to the United Arab Emirates (UAE) dirham, aiming to tap demand for the Gulf currency and provide an alternative to the U.S. dollar.
Stablecoins are digital tokens that are backed by traditional currencies such as the US dollar or euro and designed to maintain a constant value. They have grown rapidly as a means of payment and among traders who want to buy and sell cryptocurrencies such as Bitcoin outside the regulated banking system.
Tether operates the world’s largest stablecoin with its namesake dollar-backed token USDT=CCCL (USDT), which is designed to maintain a value of one US Dollar.
The roughly $117 billion (RM511.9 billion) in circulation accounts for the bulk of the $169 billion stablecoin market, according to CoinGecko data.
“The main objective is actually to create an alternative to the US dollar,” Tether CEO Paolo Ardoino said of the proposed dirham-pegged currency at an event in Dubai, adding that he was confident the dirham would become the preferred currency as global trade shifts.
He said there was a lot of interest in holding the AED (dirham) outside the UAE, citing the stability and security of the country and its balance sheet.
The dirham, like most Gulf currencies, is pegged to the US dollar.
The United Arab Emirates (UAE) is aiming to become a global hub for the cryptocurrency industry amid growing economic competition in the Gulf region.
Dubai was one of the first to allow crypto payments in sectors like real estate and tuition fees, boosting adoption rates and transaction volumes, and has developed virtual asset regulations in both the capital and Dubai.
Tether also offers stablecoins pegged to the euro, Chinese yuan, Mexican peso and gold.
Regulators have long warned about the market risks posed by the introduction of crypto assets. They worry that growing stablecoin reserves will expose the entire financial system to greater risk, and the United States has said there could be rapid outflows if holders rush to convert their tokens into traditional currencies.
Focus on emerging markets
Ardoino told Reuters in April that Tether’s recent growth was being driven by its use as an alternative to the U.S. dollar in emerging markets such as Argentina, Brazil, Turkey, Vietnam and parts of Africa, where the currency is sometimes in short supply.
Tether said in a statement on Wednesday that its dirham stablecoin will be “fully backed” by UAE-based liquid reserves.
Tether and Phoenix said the project will be launched in collaboration with Abu Dhabi Securities Exchange-listed crypto mining and blockchain conglomerate Phoenix Group, and “with the support” of investment firm Green Acorn Investments.
According to the statement, the new stablecoin aims to “streamline international trade and remittances, reduce transaction fees, and provide a hedge against currency fluctuations.”
The companies did not disclose a launch date, but Ardoino said obtaining a license from the UAE central bank could take several months.
Phoenix Group co-founder and CEO Syed Mohammad Alizadefard also said that a blockchain platform to support the stablecoin has yet to be selected.
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