Abu Dhabi Institutions Launch Dirham-Pegged Stablecoin

A trio of major Abu Dhabi institutions, including the Emirate’s sovereign wealth fund, have teamed up to launch a new dirham-pegged stablecoin. Abu Dhabi’s sovereign wealth fund ADQ, the United Arab Emirates’ largest bank, First Abu Dhabi Bank (FAB), and the massive conglomerate the International Holding Company, have partnered to launch the stablecoin, pending regulatory approval, three companies said on April 28. The goal is to place the UAE at the “forefront of global blockchain innovation,” while also strengthening the digital infrastructure, according to ADQ.

The stablecoin will be regulated by the UAE’s central bank and backed by the country’s currency, the dirham. It will also support use cases such as machine-to-machine and artificial intelligence. If it gets the nod from regulators, the new stablecoin will operate on the ADI blockchain, created by the ADI Foundation, a nonprofit organization dedicated to helping established financial systems and governments advance and adopt blockchain technology. Established in 2018, ADQ is a sovereign wealth fund focused on critical infrastructure and global supply chains. Meanwhile, IHC is one of the UAE’s largest investment firms and conglomerates with a market value of over $243 billion that has ties to the ruling family of Abu Dhabi, the country’s capital. FAB is the largest bank in the UAE, formed in 2017 through a merger between First Gulf Bank and National Bank of Abu Dhabi.

Other countries have also announced plans to launch stablecoins backed by currencies other than the US dollar. The market cap of US dollar-denominated stablecoins crossed $230 billion in April, an increase of 54% since last year, with Tether (USDT) and USDC (USDC) dominating 90% of the market. A Russian finance ministry official has floated a plan for the country to develop its own stablecoin after a freeze on wallets linked to the sanctioned Russian exchange Garantex by US authorities and stablecoin issuer Tether. However, an April 23 report from investment banking giant Citigroup predicts the stablecoin supply will remain US dollar-denominated, with non-US countries promoting national or central bank digital currency.

This initiative is part of a broader strategy to enhance the UAE's digital asset ecosystem and promote blockchain payments. The stablecoin will be issued by FAB and will operate on the ADI blockchain, an infrastructure developed by the UAE's ADI Foundation. This blockchain platform is designed to support a wide range of digital assets and financial services, aiming to streamline transactions and improve financial inclusion. The dirham-backed stablecoin is expected to play a pivotal role in the UAE's digital economy by providing a regulated and secure means of conducting transactions. The Central Bank of the UAE will oversee the stablecoin, ensuring compliance with regulatory standards and safeguarding the stability of the currency. This move aligns with the UAE's vision to become a global hub for digital assets and blockchain technology, fostering innovation and attracting investment in the fintech sector.

The collaboration between ADQ and FAB underscores the growing interest in stablecoins as a viable alternative to traditional fiat currencies. Stablecoins offer the benefits of cryptocurrencies, such as fast and secure transactions, while mitigating the volatility associated with other digital assets. By backing the stablecoin with the dirham, the UAE aims to provide a stable and reliable medium of exchange that can be used for various financial transactions, including payments, remittances, and settlements. The launch of the dirham-backed stablecoin is part of a broader effort by the UAE to integrate blockchain technology into its financial infrastructure. The ADI blockchain platform is designed to support a wide range of digital assets and financial services, providing a secure and efficient means of conducting transactions. The platform aims to streamline financial processes, reduce costs, and enhance transparency, making it an attractive option for businesses and consumers alike.

The initiative is expected to have a significant impact on the UAE's digital economy, promoting innovation and attracting investment in the fintech sector. By providing a regulated and secure means of conducting transactions, the dirham-backed stablecoin is poised to become a key player in the UAE's financial landscape, driving growth and development in the digital asset ecosystem. The collaboration between ADQ and FAB, along with the support of the Central Bank of the UAE, demonstrates the country's commitment to leveraging blockchain technology to enhance its financial infrastructure and promote economic growth.