365int
Sonic Labs has announced a strategic pivot from developing a U.S. dollar-pegged algorithmic stablecoin to creating a stablecoin denominated in the United Arab Emirates (UAE) dirham. This decision aligns with the UAE’s plans to introduce its digital dirham central bank digital currency (CBDC) in late 2025.
Background on the Shift
Initially, Sonic Labs co-founder Andre Cronje revealed plans for a USD-pegged algorithmic stablecoin offering an annual percentage rate (APR) of up to 23%. However, on March 28, Cronje announced a change in direction, stating that the company would no longer pursue the USD-based stablecoin. Instead, they plan to release a “mathematically bound numerical Dirham, which is settled and denominated in USD,” emphasizing that it is distinct from a USD-based algorithmic stablecoin.
UAE’s Digital Dirham Initiative
The UAE’s forthcoming digital dirham aims to enhance financial stability and combat financial crime. Scheduled for launch in the fourth quarter of 2025, the blockchain-based currency will be accepted alongside its physical counterpart across all payment channels. Khaled Mohamed Balama, governor of the Central Bank of the UAE, highlighted the potential benefits of this digital currency in promoting a secure and efficient financial ecosystem.
Industry Implications
Sonic Labs’ decision reflects a cautious approach to algorithmic stablecoins, especially in light of the Terra ecosystem collapse in 2022, which resulted in significant financial losses and heightened regulatory scrutiny. By aligning with the UAE’s digital currency initiatives, Sonic Labs positions itself within a regulated framework, potentially mitigating risks associated with algorithmic stablecoins.
