DUBAI: Cryptocurrency company Tether said on Wednesday it plans to provide a new stablecoin pegged to the United Arab Emirates (UAE) dirham as it taps demand for the Gulf currency and seeks to offer alternatives to the U.S. dollar.
Stablecoins are digital tokens designed to keep a constant value and are backed by traditional currencies such as the U.S. dollar or euro. They can be used as a form of payment, as well as to trade in and out of other tokens, such as bitcoin, on crypto exchanges.
“The main purpose is actually creating an optionality towards the U.S. dollar,” Tether CEO Paolo Ardoino said during an event in Dubai, adding that he believed the dirham would become 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 UAE is pushing to become a global hub for the crypto industry as economic competition heats up in the Gulf region.
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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 in Dubai.
Regulators have long warned about market risks from the adoption of crypto assets. The U.S. has said stablecoin reserves could be subject to rapid outflows, for example if holders rushed to exchange tokens back into traditional currencies.
Tether’s eponymous dollar-pegged stablecoin (USDT) is designed to maintain a constant value of $1 and is widely used in crypto-to-crypto trading.
There is around $117 billion of the token in circulation, making up the bulk of the $169 billion stablecoin market, according to CoinGecko data.
Tether also provides stablecoins pegged to other currencies such as the euro and 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 and “with support” from investment firm Green Acorn Investment, Tether and Phoenix said.
The two firms did not provide a specific date for the product launch but Ardoino said licensing by the UAE Central Bank would take a few months.
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