Tether to Launch Dirham-Pegged Stablecoin in the UAE
Stablecoin issuer Tether has announced plans to introduce a new stablecoin pegged to the United Arab Emirates (UAE) dirham. The initiative, disclosed on August 21, marks Tether’s latest effort to expand its range of fiat-pegged digital assets and reflects the growing importance of the UAE in the global cryptocurrency landscape.
Collaboration with UAE-Based Companies
In a statement, Tether, the world’s largest stablecoin issuer, revealed that the new dirham-pegged stablecoin would be developed in collaboration with Phoenix Group PLC, a prominent UAE-based technology conglomerate, and Green Acorn Investments Ltd. Although the exact launch date has not been specified, the stablecoin will be backed 1:1 by liquid reserves based in the UAE, ensuring its value remains stable and secure.
The stablecoin will be issued under the Payment Token Services Regulation introduced by the Central Bank of the UAE in June 2024. This regulation provides a framework for the issuance and management of digital assets, ensuring that Tether’s new offering complies with local laws and regulatory requirements. As part of its commitment to regulatory compliance, Tether will seek licensing under this framework to ensure the stablecoin adheres to the Central Bank’s standards.
Rising Cryptocurrency Adoption in Dubai
Dubai has seen a significant increase in cryptocurrency adoption since the establishment of the Virtual Asset Regulatory Authority (VARA) in 2022. VARA, an independent regulatory body, is responsible for overseeing the licensing, regulation, and governance of the cryptocurrency sector in Dubai. The surge in digital asset activity has created a favorable environment for the introduction of new financial products like Tether’s dirham-pegged stablecoin.
Tether’s announcement highlights the potential of the new stablecoin to serve as a cost-effective alternative for international trade and remittances. The stablecoin is expected to enable businesses and individuals to leverage the benefits of the UAE dirham (AED) while mitigating the risks associated with currency fluctuations. Tether envisions the stablecoin becoming a valuable tool for those seeking a secure and efficient means of transacting in the UAE and beyond.
Strategic Importance of the UAE Market
Paolo Ardoino, CEO of Tether, expressed optimism about the impact of the new stablecoin, emphasizing the UAE’s growing role as a global economic hub. “The United Arab Emirates is becoming a significant global economic hub, and we believe our users will find our Dirham-pegged token to be a valuable and versatile addition,” Ardoino said. He also noted that the stablecoin could become an “essential tool” for businesses and individuals looking to conduct transactions securely and efficiently using the dirham.
The upcoming dirham-pegged stablecoin will join Tether’s existing lineup of fiat-backed digital assets, which includes EURT, a euro-backed stablecoin introduced in 2020, and CNHT, a Chinese yuan-backed stablecoin launched in 2022. These assets have been developed to provide users with reliable, stable alternatives to volatile cryptocurrencies, allowing them to transact and store value with greater confidence.
Tether’s Market Dominance and Challenges
Tether’s flagship product, USDT, remains the largest stablecoin globally, with a market capitalization exceeding $117 billion. USDT holds a commanding market share of nearly 70%, making it a dominant force in the cryptocurrency ecosystem. Despite its market leadership, Tether has faced criticism over the years, particularly regarding the potential misuse of USDT by entities subject to sanctions and other illicit activities.
In response to these concerns, Tether has taken steps to enhance transparency and oversight. The company partnered with blockchain analytics firm Chainalysis to monitor USDT transactions in the secondary market, aiming to detect and prevent unlawful activities. This partnership reflects Tether’s commitment to maintaining the integrity of its stablecoins and addressing the challenges associated with their widespread use.
The Future of Tether’s Dirham-Pegged Stablecoin
The launch of Tether’s dirham-pegged stablecoin represents a significant development in the evolution of digital assets in the Middle East. As the UAE continues to position itself as a leader in the global cryptocurrency market, the introduction of a stablecoin backed by the local currency could play a crucial role in driving further adoption of digital finance solutions in the region.
Tether’s strategic move to enter the UAE market aligns with its broader mission to provide users with reliable and stable digital assets that can facilitate seamless transactions across borders. The new stablecoin is expected to appeal to a wide range of users, including businesses engaged in international trade, expatriates sending remittances, and individuals seeking to protect their wealth from currency volatility.
As Tether prepares to launch its dirham-pegged stablecoin, the company will continue to work closely with UAE regulators to ensure that the new asset complies with all relevant laws and standards. This approach not only reinforces Tether’s commitment to regulatory compliance but also positions the company as a trusted partner in the rapidly evolving digital asset landscape.
Tether’s plan to develop a dirham-pegged stablecoin in the UAE is a testament to the growing importance of the Middle East in the global cryptocurrency market. By leveraging the UAE’s favorable regulatory environment and collaborating with local partners, Tether aims to provide users with a secure and efficient means of transacting in the region, further solidifying its position as a leader in the stablecoin industry.
