Tether to Launch New Stablecoin Pegged to UAE’s Dirham
Tether, the largest company in the digital asset industry, recently announced its plans to launch a new stablecoin that will be pegged to the United Arab Emirates Dirham (AED). This move comes as the cryptocurrency market continues to grow, and as Tether looks to tap into the demand for Gulf currencies. The new stablecoin aims to offer an alternative to the U.S. dollar while benefiting from the UAE’s growing role in the global crypto industry.
What Are Stablecoins?
Stablecoins are a type of cryptocurrency designed to maintain a stable value by being backed by traditional currencies such as the U.S. dollar, euro, or, in this case, the UAE dirham. They have gained popularity as a way to make payments and as a tool for traders who want to buy and sell cryptocurrencies like Bitcoin without using the traditional banking system. Tether already operates the world’s largest stablecoin, USDT, which is pegged to the U.S. dollar and is widely used in the cryptocurrency market.
Why a Dirham-Pegged Stablecoin?
According to Paolo Ardoino, CEO of Tether, the main purpose of launching a dirham-pegged stablecoin is to create more options for people who want alternatives to the U.S. dollar. Ardoino mentioned during an event in Dubai that the dirham is becoming a preferred currency for many as global trade patterns change. He also highlighted the stability and safety of the UAE, making the dirham an attractive option for people outside of the country who are looking for a secure currency.
The UAE dirham, like most Gulf currencies, is already pegged to the U.S. dollar, which gives it a strong foundation. However, the dirham-pegged stablecoin will offer additional benefits, especially for international trade and remittances, by reducing transaction fees and providing a hedge against currency fluctuations.
Tether’s Role in the Cryptocurrency Market
Tether has a significant presence in the cryptocurrency market, with its USDT token making up the bulk of the stablecoin market. According to data from CoinGecko, Tether’s dollar-pegged token accounts for about $117 billion of the $169 billion stablecoin market. This makes Tether a key player in the digital asset space.
In addition to USDT, Tether also offers stablecoins pegged to other major currencies, including the euro, Chinese yuan, Mexican peso, and even gold. The introduction of a dirham-pegged stablecoin is a strategic move for Tether as it continues to expand its offerings and tap into emerging markets like the UAE.
The UAE’s Growing Crypto Industry
The UAE has been making significant strides to become a global hub for the cryptocurrency industry. With cities like Dubai and Abu Dhabi leading the way, the country has quickly enabled cryptocurrency payments in areas such as real estate and school fees. This has helped boost the adoption of digital assets and increased transaction volumes across the country.
The UAE has also developed virtual asset regulations that provide a clear framework for companies operating in the cryptocurrency space. This has made the country an attractive destination for crypto businesses and investors looking to take advantage of the favorable regulatory environment.
Collaboration with Phoenix Group and Green Acorn Investment
Tether is not working alone on this project. The new dirham-pegged stablecoin will be launched in collaboration with Abu Dhabi-listed cryptomining and blockchain conglomerate Phoenix Group and with support from investment firm Green Acorn Investment. This partnership is expected to play a crucial role in the success of the new stablecoin, especially given the expertise of Phoenix Group in the blockchain and crypto space.
Phoenix Group’s Co-Founder and CEO, Seyedmohammad Alizadehfard, expressed his excitement about the collaboration with Tether. He emphasized that the dirham-pegged stablecoin has the potential to transform the digital economy across the region, particularly as Abu Dhabi continues to adopt progressive policies towards blockchain and digital assets.
Ensuring Stability Through UAE-Based Reserves
One of the key features of Tether’s new stablecoin is that it will be fully backed by liquid UAE-based reserves. This means that every dirham-pegged token will be supported by actual assets held in reserve, ensuring the stability and reliability of the stablecoin. Tether has a strong track record of maintaining reserve standards, which has helped build confidence in its stablecoins.
By backing the dirham-pegged stablecoin with UAE-based reserves, Tether aims to provide users with a secure and trustworthy digital representation of the AED. This is particularly important for businesses and individuals who rely on stablecoins for international trade, remittances, and other financial transactions.
Reducing Risks and Streamlining Transactions
The new dirham-pegged stablecoin is expected to offer several benefits for users. First, it will help streamline international trade and remittances by reducing transaction fees and making cross-border payments more efficient. This is especially important in regions where traditional banking systems can be slow and expensive.
Second, the stablecoin will provide a hedge against currency fluctuations, which can be a significant risk in international trade. By pegging the stablecoin to the UAE dirham, Tether aims to offer users a stable and reliable currency option that can help protect against volatile exchange rates.
Addressing Regulatory Concerns
While stablecoins offer many benefits, they have also raised concerns among regulators. Authorities worry that the growing reserves of stablecoins could pose risks to the broader financial system. For example, if a large number of stablecoin holders suddenly decide to exchange their tokens for traditional currencies, it could lead to a rapid outflow of funds from the crypto market.
To address these concerns, Tether has been working closely with regulators, including the UAE Central Bank, to ensure that the new stablecoin complies with all necessary regulations. Tether plans to secure licensing under the UAE Central Bank’s newly introduced Payment Token Services Regulation, making this a pioneering effort in the region.
Tether’s Focus on Emerging Markets
Tether’s recent growth has been driven by its use as an alternative to the U.S. dollar in emerging markets. In countries like Argentina, Brazil, Turkey, Vietnam, and parts of Africa, the U.S. dollar can sometimes be in short supply, making stablecoins an attractive option. By offering stablecoins pegged to local currencies, Tether is helping to meet the demand for reliable digital assets in these regions.
The introduction of a dirham-pegged stablecoin is part of Tether’s broader strategy to expand its presence in emerging markets. By providing users with a stable and secure currency option, Tether is helping to drive the adoption of digital assets and support economic growth in these regions.
Tether’s launch of a new stablecoin pegged to the UAE dirham is a significant development in the cryptocurrency market. With the support of Phoenix Group and Green Acorn Investment, Tether is well-positioned to tap into the growing demand for Gulf currencies and offer a valuable alternative to the U.S. dollar. The new stablecoin is expected to play a key role in the UAE’s growing crypto industry, offering benefits for international trade, remittances, and more.
