Sonic Labs has decided to abandon its plans for a US dollar-pegged algorithmic stablecoin in favor of developing a stablecoin based on the United Arab Emirates dirham. The announcement followed a week after the company's initial news that it was pursuing a USD-based stablecoin with an attractive annual percentage rate (APR). According to the company's co-founder, the new stablecoin will be mathematically linked to the dirham yet settled and denominated in USD, distancing itself from the previous algorithmic model. This strategic shift is in line with the UAE's plans to roll out its own central bank digital currency (CBDC) in late 2025, which aims to enhance financial stability and counteract financial crime. The move also comes amidst ongoing scrutiny of algorithmic stablecoins, particularly after the collapse of Terra's UST in 2022, which led to major losses in the crypto space. Critics have raised concerns about the risks associated with algorithmic stablecoins, prompting the European Union to take regulatory steps to prevent similar failures. Meanwhile, stablecoins are increasingly being adopted for smaller everyday transactions rather than large transfers.

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