UAE Dirham Takes Spotlight As Sonic Labs Drops US Dollar Stablecoin

• Sonic Labs has abandoned plans for a USD algorithmic stablecoin, pivoting to a UAE dirham-denominated alternative.
• The decision follows the UAE’s announcement of a digital dirham CBDC launch planned for Q4 2025.
• Algorithmic stablecoins remain controversial since Terra’s 2022 collapse, with the EU’s MiCA regulations set to prohibit them. Sonic Labs has scrapped its plans to launch a US dollar-pegged algorithmic stablecoin, announcing instead it will develop a United Arab Emirates dirham-denominated alternative. The sudden strategy shift comes just one week after co-founder Andre Cronje had revealed the company was working on a USD stablecoin offering up to 23% annual percentage rate.

Andre Cronje announced the reversal via X on March 28, using deliberately playful language: “We will no longer be releasing a USD based algorithmic stable coin. Completely unrelated, we will be releasing a mathematically bound numerical Dirham which is settled and denominated in USD, which is definitely not a USD based algorithmic stable coin.”

The timing aligns closely with the UAE’s recent announcement that it will launch its digital dirham central bank digital currency (CBDC) in the fourth quarter of 2025. Khaled Mohamed Balama, governor of the Central Bank of the UAE, has stated the blockchain-based dirham could strengthen financial stability and help combat financial crime. According to the Khaleej Times, the digital currency will be accepted alongside physical dirhams across all payment channels.

Industry observers note that Sonic’s original stablecoin plans faced significant backlash, particularly given the crypto industry’s lingering trauma from the Terra ecosystem collapse in 2022. Algorithmic stablecoins have been viewed with skepticism since Terra’s UST stablecoin—which similarly offered yields exceeding 20%—catastrophically lost its dollar peg, wiping out approximately $40 billion in value.

Cronje himself had previously admitted to experiencing PTSD related to algorithmic stablecoins from previous market cycles, writing: “Pretty sure our team cracked algo stable coins today, but previous cycle gave me so much PTSD not sure if we should implement.”

The Terra collapse remains a cautionary tale in cryptocurrency markets. When TerraUSD (UST) depegged from the dollar in May 2022, its sister token Luna—once valued above $120 and ranking among the top 10 cryptocurrencies by market capitalization—plummeted over 98% to $0.84.

Regulatory bodies have responded to this crisis by tightening oversight. The European Union’s Markets in Crypto-Assets Regulation (MiCA) will explicitly prohibit algorithmic stablecoins to prevent another Terra-like failure.

Meanwhile, stablecoin usage patterns continue to evolve. During Cointelegraph’s Chainreaction live show on March 27, David Pakman, managing partner at CoinFund, observed that stablecoins are increasingly being used for smaller everyday payments rather than large transfers: “We’ve seen a significant decrease in the size of each stablecoin transaction, which points to the fact that they are being used more as payments and less for large transfers.”

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