DUBAI, Aug 21 (Reuters) – Cryptocurrency firm Tether on Wednesday announced a new stable pegged to the United Arab Emirates (UAE) dirham, aiming to tap demand for the Gulf currency and offer an alternative to the U.S. dollar. They announced that they would be issuing coins.
Stablecoins are digital tokens designed to maintain a constant value and are backed by traditional currencies such as the US dollar or the euro. These are rapidly growing as a payment method and among traders who want to buy and sell cryptocurrencies such as Bitcoin outside of the regulated banking system.
Tether operates the world’s largest stablecoin with its namesake dollar-pegged token (USDT), which is designed to maintain the value of $1.
The roughly $117 billion in total circulation makes up the bulk of the $169 billion stablecoin market, according to CoinGecko data.
“The main objective is to actually create an option against the US dollar,” Tether CEO Paolo Ardoino said at an event in Dubai of the proposed dirham-pegged unit. , adding that the dirham will become the preferred currency as global trade changes.
“We see a lot of interest in holding AEDs (dirhams) outside the UAE,” he said, citing the stability and security of both the country and its balance sheet.
The dirham, like most Gulf currencies, is pegged to the US dollar.
As economic competition intensifies in the Gulf region, the UAE is poised to become a global hub for the crypto industry.
While developing crypto asset regulations in both the capital Abu Dhabi and Dubai, it has quickly enabled crypto payments in areas such as real estate and school fees, boosting adoption rates and transaction volumes.
Tether also offers stablecoins pegged to the euro, Chinese yuan, Mexican peso, and gold.
Regulators have long warned of market risks from the introduction of crypto assets. They are concerned that growing stablecoin reserves will put the broader financial system at greater risk, and the US is worried that holders will rush to exchange their tokens for traditional currencies. It states that there is a possibility of a rapid outflow.
Focus on emerging markets
Ardoino told Reuters in April that Tether’s recent growth was due to its use as a substitute for the dollar in emerging markets such as Argentina, Brazil, Turkey, Vietnam and parts of Africa, where dollars are sometimes in short supply. He said usage is the driving force.
Tether said in a statement on Wednesday that the dirham stablecoin will be “fully backed” by UAE-based liquid reserves.
According to Tether and Phoenix, the service was launched in collaboration with Abu Dhabi-listed cryptomining and blockchain conglomerate Phoenix Group (PHX.AD), Opens in a new tab, and received ‘support from investment firm Green Acorn Investments. It is said that it will be started in response to the
According to a statement, the new stablecoin aims to “streamline international trade and remittances, reduce transaction fees, and provide a hedge against currency fluctuations.”
The companies did not give a release date, but Ardoino said licensing by the UAE central bank would take several months.
Phoenix Group co-founder and CEO Seyed Mohammad Alizadefard also said that no blockchain platform has been selected to support the stablecoin.
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Report by Federico Maccioni and Catherine Cartier. Editing: Jason Neely, Tommy Reggioli Wilkes, Kirsten Donovan
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