Tether, a leading cryptocurrency platform, has launched a new stablecoin pegged to the United Arab Emirates Dirham (AED), in collaboration with the UAE’s tech giant Phoenix Group and Green Acorn Investments.

This new digital asset will be fully backed by liquid reserves based in the UAE, ensuring stability and confidence for users. The cryptocurrency company will seek licensing under the UAE Central Bank's new Payment Token Services Regulation for its AED-linked stablecoin. The digital tokens aims to offer a seamless and cost-effective way to access the benefits of the AED through blockchain technology, easing international trade, reducing transaction charges, providing protection against currency fluctuations, and making it a valuable addition to the UAE's financial sector.

Announcing the initiative, Paolo Ardoino, CEO of Tether, underlined, “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. Tether’s Dirham-pegged stablecoin is set to become an essential tool for businesses and individuals looking for a secure and efficient means of transacting in the United Arab Emirates Dirham, whether for cross-border payments, trading, or simply diversifying one’s digital assets.”

Seyed Mohammad Alizadehfard, Co-Founder and Group CEO of Phoenix Group, also commented, “We are thrilled to be working with Tether on bringing a UAE Dirham-pegged stablecoin to the market and are confident in its potential to transform the digital economy for users across the region and beyond. This collaboration with Tether not only underscores our commitment to innovation and excellence but also reflects our dedication to providing financial solutions that meet the needs of our customers. Abu Dhabi’s progressive stance towards blockchain, digital assets, and innovation makes it the perfect launchpad.”

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The global stablecoin market is currently valued at $150 billion, with USDt leading the way with a market cap of over $115 billion. By 2028, this industry could grow to an impressive $2.8 trillion. In the United Arab Emirates, cryptocurrency usage has surged since 2022, due to the creation of the Virtual Asset Regulatory Authority, the world’s first independent crypto regulator. This favourable regulatory environment has positioned cities like Dubai and Abu Dhabi as global hubs for innovation in crypto assets and blockchain technology.

The AED stablecoin, pegged to the UAE Dirham—which in turn is tied to the USD—offers businesses a stable and reliable digital asset, helping to cushion against currency volatility. It also has the potential to streamline cross-border transactions, making it easier and more cost-effective for businesses to trade with global partners, especially within the Gulf region and countries closely connected to the UAE.

Businesses could see significant benefits from quicker settlement times and lower transaction costs, improving their liquidity and cash flow management. For instance, a recent ruling by the Dubai Court of First Instance, which ordered an employer to pay an outstanding salary in both cryptocurrency and Dirham, hinted that cryptocurrency salaries might soon become a new reality. With the support of a Dirham-linked stablecoin, more companies are likely to embrace blockchain technology, recognising its strengths in transparency, security, and efficiency.

Industry experts weighed in on the move, “This marks a significant step in the fusion of traditional finance and the digital economy in the Middle East, offering more stability and convenience for transactions in the region…With a Dirham-pegged stablecoin, businesses and individuals can benefit from the security of blockchain with the stability of the UAE's currency…This development underscores the UAE's role as a global leader in fintech and blockchain innovation, solidifying its position on the global financial stage…As the world increasingly embraces digital assets, this stablecoin could become a pivotal tool for cross-border transactions and trade in the Middle East,” said Ismail Issa, Head of Web3 & Metaverse at Emirates Airways. 

Faizan Abdul Wasay, Engagement Manager at Crowe UAE also commented, “This move is part of a growing trend to create alternatives to the US dollar. The UAE dirham-pegged stablecoin could potentially offer a new level of stability and security for investors. This development marks another milestone in the region's crypto journey, following recent advancements such as Dubai's VARA regulations, Bahrain's crypto-friendly policies, and Saudi Arabia's blockchain initiatives. The Middle East is certainly becoming a hub for crypto innovation!”