Tether to Introduce Dirham-Based Stablecoin Targeting the Emerging Market

Stablecoins are digital tokens designed to have a constant value backed by traditional currencies such as the U.S. dollar or euro.

Cryptocurrency firm Tether said on Wednesday it will launch a new stablecoin pegged to the United Arab Emirates dirham, in a move that comes as the Gulf currency gains steam and authorities push to attract crypto businesses.

Stablecoins, digital tokens designed to hold a constant value by being pegged to traditional currencies like the U.S. dollar or the euro, have seen rapid growth in recent years, both as a form of payment and among traders wanting to buy and sell cryptocurrencies like bitcoin outside of the regulated banking system.

Tether runs the world’s biggest stablecoin with its eponymous dollar-pegged token (USDT), which is meant to maintain a value of $1.

The roughly $117 billion in circulation makes up the bulk of the $169 billion stablecoin market, according to CoinGecko data.

“The main purpose is actually creating an optionality towards the U.S. dollar,” Tether Chief Executive Paolo Ardoino said of the planned dirham-pegged unit at an event in Dubai, adding that he saw the dirham becoming a preferred currency as global trade shifts.

“We see a lot of interest in holding AED (dirham) outside of the UAE,” he said, citing the stability and safety of both the country and its balance sheet.

The dirham, like most Gulf currencies, is pegged to the U.S. dollar. The UAE is pushing to become a global hub for the crypto industry as economic competition heats up in the Gulf region.

It has been quick to enable cryptocurrency payments in areas like real estate and school fees, boosting rates of adoption and transaction volumes while developing virtual asset regulation in both the capital, Abu Dhabi, and Dubai.

Tether also has stablecoins pegged to the euro, the Chinese yuan, the Mexican peso, and gold.

Regulators have long warned about market risks from the adoption of crypto assets. They say growing stablecoin reserves expose the broader financial system to bigger risks, with the U.S. saying there could be a rapid outflow if holders rush to exchange tokens back into traditional currencies.

Targeting the emerging market

Ardoino said in April that Tether’s recent growth was being driven by its use as an alternative to the dollar in emerging markets like Argentina, Brazil, Turkey, Vietnam, and parts of Africa, where the greenback is sometimes in short supply.

Tether said in a statement on Wednesday that the dirham stablecoin would be “fully backed” by liquid UAE-based reserves.

It will be launched in collaboration with Abu Dhabi-listed cryptomining and blockchain conglomerate Phoenix Group, “with support” from Green Acorn Investment, Tether, and Phoenix.

The new stablecoin aims to “streamline international trade and remittances, reduce transaction fees, and provide a hedge against currency fluctuations,” the statement said.

The two firms did not give a launch date, but Ardoino said licensing by the UAE Central Bank would take a few months.

Phoenix Group Co-founder and Chief Executive Seyed Mohammad Alizadehfard also said the blockchain platform that would support the stablecoin had not yet been selected.

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