Sonic Labs Rejects Algorithmic USD Stablecoin Plans: Develops Dirham-Backed Alternative

Sonic Labs has canceled its plans to launch a US dollar-pegged algorithmic stablecoin, opting instead to develop a United Arab Emirates (UAE) dirham-based alternative.

Strategy Shift and New Roadmap

Sonic Labs co-founder Andre Cronje stated on March 22 that the company was working on an algorithmic stablecoin with an annual percentage rate (APR) of up to 23%. However, a week later, the company abandoned this plan.

On March 28, Cronje posted on X:

“We will no longer be releasing a USD-based algorithmic stablecoin. Completely unrelated, we will be releasing a mathematically bound numerical Dirham, which is settled and denominated in USD. This is definitely not a USD-based algorithmic stablecoin.”

This strategic shift comes shortly after the UAE Central Bank announced plans to launch its digital dirham (CBDC) in the fourth quarter of 2025.

Digital Dirham and Financial Stability

UAE Central Bank Governor Khaled Mohamed Balama stated that the blockchain-based digital dirham would enhance financial stability and contribute to combating financial crime. The digital currency will be accepted across all payment channels alongside physical banknotes.

Sonic Labs Faced Criticism Over Algorithmic Stablecoins

Sonic Labs’ initial plans for an algorithmic stablecoin faced intense criticism due to the collapse of the Terra ecosystem in 2022.

Andre Cronje admitted that these models posed risks, even stating that he suffered from post-traumatic stress disorder (PTSD) due to past experiences:

“I’m pretty sure our team cracked algorithmic stablecoins today, but the previous cycle gave me so much PTSD that I’m not sure if we should implement it.”

In May 2022, the $40 billion Terra ecosystem collapsed, shaking confidence in the algorithmic stablecoin model. Terra’s stablecoin, UST, was yielding over 20% interest through Anchor Protocol before losing its peg and plummeting to $0.30. Terraform Labs co-founder Do Kwon was forced to propose a rescue plan.

During this collapse, LUNA fell from $120 to $0.84, losing over 98% of its value.

These shifts in the stablecoin ecosystem, combined with Sonic Labs’ strategy change and the UAE’s digital currency initiative, signal a new era for the market.

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The post Sonic Labs Ditches USD for a Dirham-Backed Alternative appeared first on Coin Engineer.