Tether to Introduce Dirham-Backed Stablecoin in UAE

Tether, the dominant force in the stablecoin sector, is set to launch a new digital currency backed by the United Arab Emirates dirham (AED). This move is part of a collaboration with the UAE’s Phoenix Group and Green Acorn Investments.

The new stablecoin, which will be available to users soon, is expected to enhance international trade and remittances by providing a cost-effective alternative to fiat currency. Tether’s decision to introduce this dirham-pegged token reflects its commitment to meeting the growing demand for stable and reliable digital assets in global markets.

Phoenix Group and Green Acorn Investments Partner with Tether

Phoenix Group, a prominent tech conglomerate based in Abu Dhabi, is a key partner in this venture. The group’s involvement emphasizes its commitment to offering innovative financial solutions that cater to the evolving needs of its clients.

Seyed Mohammad Alizadehfard, Phoenix Group’s co-founder and Group CEO, noted that this partnership aligns with the firm’s mission to provide cutting-edge financial products. With the UAE’s cryptocurrency usage on the rise (driven by the establishment of the Virtual Asset Regulatory Authority), this launch is timely.

Green Acorn Investments, another UAE-based partner, will ensure that the new stablecoin is firmly rooted in the local finance ecosystem, guaranteeing stability and instilling user confidence.

Tether Launches USDT Tokens on Aptos Blockchain

Tether’s expansion into the UAE market is part of a broader strategy to increase its global presence. The company recently launched its USDT token on the Aptos blockchain, further demonstrating its commitment to improving broader access to digital currencies worldwide.

This integration with Aptos aims to reduce transaction costs significantly, making USDT more viable for various use cases, from large-scale enterprise operations to everyday microtransactions. Paolo Ardoino, CEO of Tether, believes that the dirham-backed token will be a valuable addition to Tether’s range of stablecoins, offering users greater flexibility and stability in their financial dealings.

Abu Dhabi Proposes Rules for Fiat-Referenced Tokens

Meanwhile, Abu Dhabi’s financial regulator, the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM), has proposed a new regulatory framework for fiat-referenced tokens (FRTs), a specific type of stablecoin. This proposal is a response to increased interest from potential issuers and other stakeholders who are keen to explore the issuance of FRTs within the ADGM jurisdiction.

Fiat-referenced tokens (FRTs) are digital assets backed by liquid assets in the same currency as the token itself. They are designed to be stable, with their value tied to a fixed amount of a single fiat currency.

The FSRA’s proposed framework aims to ensure that FRTs maintain their stability by requiring that the market value of reserve assets match or exceed the par value of all FRTs in circulation at the close of each business day. Under the proposed rules, FRT issuers will undergo strict operational requirements.

They would be required to value their reserve assets on a market-to-market basis daily, ensuring that the token’s backing remains robust and that the assets can be liquidated with minimal impact on price. Additionally, if an issuer manages more than one FRT, they would need to maintain separate pools of reserve assets for each token to avoid any cross-liabilities.

FSRA Calls for Framework Scrutiny

The FSRA has called for public feedback on the proposed framework, with a deadline set for October 3, 2024. After this date, the FSRA will review the comments and decide whether adjustments are necessary before finalizing and enacting the regulatory framework.

In defining FRTs, the FSRA consulted international practices and proposed that these tokens be recognized as digital assets whose transfer and storage are facilitated through distributed ledger technology.

The proposed definition also stipulates that FRT holders should have the right to redeem the token for an equivalent amount of the fiat currency it references directly from the issuer. The FSRA’s regulatory proposal also includes a review of the current suite of regulated activities within the ADGM to ensure they are consistent with the new framework for FRTs.

This review is expected to address various aspects, including the use of FRTs in payment services and their acceptance in investment products. Recent developments, such as the Central Bank of the UAE’s approval of a new stablecoin licensing system in June, reflect the region’s growing focus on fostering innovation in the digital economy.