Federico Maccioni and Catherine Cartier
DUBAI (Reuters) – A cryptocurrency firm said on Wednesday it plans to launch a modern stablecoin pegged to the United Arab Emirates (UAE) dirham, tapping into demand for the Gulf currency and seeking to offer alternatives to the U.S. dollar.
Stablecoins are digital tokens designed to hold a fixed value backed by customary currencies like the US dollar or euro. They have seen rapid growth both as a form of payment and among traders looking to buy and sell cryptocurrencies like bitcoin outside the regulated banking system.
Tether operates the world’s largest stablecoin called USDT (a dollar-pegged token), which is expected to remain valued at $1.
There is about $117 billion in circulation, according to CoinGecko data, accounting for most of the $169 billion in the stablecoin market.
“The main goal is really to create optionality on the US dollar,” Tether CEO Paolo Ardoino said of the proposed dirham-pegged unit at an event in Dubai, adding that he believes the dirham will become the currency of choice as global trade changes.
“We are seeing a lot of interest in storing AED (dirham) outside the UAE,” he said, citing the country’s stability, security and balance sheet.
The dirham, like most Gulf currencies, is pegged to the US dollar.
The UAE is seeking to become a global hub for the cryptocurrency industry as economic competition intensifies in the Gulf region.
It quickly enabled cryptocurrency payments in areas such as real estate and school fees, which increased the pace of adoption and transaction volume, while also advancing regulation of virtual assets in both the capital Abu Dhabi and Dubai.
Tether also offers stablecoins pegged to the euro, Mexican peso, and gold.
Regulators have long warned of the market risks associated with the adoption of crypto assets. They fear that growing stablecoin reserves are exposing the broader financial system to greater risk, and the U.S. says there could be a piercing outflow if holders rush to exchange the tokens back for customary currencies.
FOCUS ON EMERGING MARKETS
Ardoino told Reuters in April that Tether’s recent surge in value was due to its operate as an alternative to the dollar in emerging markets such as Argentina, Brazil, Turkey, Vietnam and parts of Africa, where the dollar can sometimes be in tiny supply.
Tether said in a statement on Wednesday that the dirham stablecoin will be “fully backed” by liquid reserves in the United Arab Emirates.
Tether and Phoenix said the project will be launched in partnership with Abu Dhabi-listed cryptocurrency mining and blockchain conglomerate Phoenix Group and “with the support” of investment firm Green Acorn Investment.
According to the statement, the aim of the modern stablecoin is to “facilitate international trade and remittances, reduce transaction fees, and provide protection against currency fluctuations.”
Both companies did not provide a start date, but Ardoino said it would take several months to obtain a license from the UAE Central Bank.
Phoenix Group co-founder and CEO Seyed Mohammad Alizadehfard also said that the blockchain platform that will support the stablecoin has not yet been selected.
