Sonic Labs Shifts Focus to UAE Dirham Stablecoin Amid Criticism

According to Cointelegraph, Sonic Labs has decided to abandon its plans to launch a US dollar-pegged algorithmic stablecoin, opting instead to develop a stablecoin denominated in the United Arab Emirates dirham. This strategic shift was announced by Sonic Labs co-founder Andre Cronje, who initially revealed the company's intention to create a US dollar-pegged stablecoin with an annual percentage rate (APR) of up to 23% on March 22. However, just a week later, Cronje announced a change in direction, stating in a March 28 post on X that the firm would no longer pursue the USD-based algorithmic stablecoin. Instead, Sonic Labs plans to release a mathematically bound numerical Dirham, which will be settled and denominated in USD, but not classified as a USD-based algorithmic stablecoin. The decision to pivot comes shortly after the United Arab Emirates announced its plans to launch a digital dirham central bank digital currency (CBDC) in the fourth quarter of 2025. Khaled Mohamed Balama, governor of the Central Bank of the UAE, highlighted the potential benefits of the blockchain-based dirham, including enhanced financial stability and improved measures to combat financial crime. The digital currency is expected to be accepted alongside its physical counterpart in all payment channels, as reported by the Khaleej Times. Sonic Labs faced significant criticism over its initial stablecoin plans, particularly in light of the collapse of the Terra ecosystem in 2022, which raised concerns across the crypto industry regarding algorithmic stablecoins. Cronje himself has previously expressed apprehension about algorithmic stablecoins, citing post-traumatic stress disorder (PTSD) from previous cycles. The Terra ecosystem's collapse in May 2022 resulted in the loss of tens of billions of dollars in value, with its algorithmic stablecoin TerraUSD (UST) losing its dollar peg and crashing to a low of around $0.30. The sister token LUNA also saw a dramatic decline, plunging over 98% from its early April 2022 value. The fallout from Terra's collapse has prompted regulatory responses, such as the European Union's Markets in Crypto-Assets Regulation (MiCA) bill, which aims to prohibit algorithmic stablecoins to prevent similar failures. Meanwhile, stablecoins are increasingly being used for smaller, everyday payments rather than large transfers, according to CoinFund managing partner David Pakman. He noted a significant decrease in the size of each stablecoin transaction, indicating their growing use as a payment method rather than for large transfers.