Sonic Labs has abandoned its plan to launch a US dollar-pegged algorithmic stablecoin just one week after revealing the project publicly. The company will instead develop a mathematically bound digital currency tied to the United Arab Emirates dirham, aligning with the UAE’s central bank digital currency (CBDC) rollout scheduled for late 2025.
“We will no longer be releasing a USD-based algorithmic stablecoin,”
co-founder Andre Cronje said in a March 28 post on X. “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 stablecoin.”
Cronje had previously announced the algorithmic stablecoin on March 22, stating it could generate up to 23% annual percentage rate (APR). The project, according to Cronje, would yield more than 200% APR at $10 million total value locked (TVL), scale down to 23.5% at $100 million, and stabilize around 4.9% at $1 billion.
Backlash Over Algorithmic Model
The reversal follows mounting concerns over algorithmic stablecoins, particularly in the wake of the $40 billion collapse of the Terra ecosystem in 2022. TerraUSD (UST), the algorithmic stablecoin at the center of the crisis, had offered a similar 20% yield on the Anchor Protocol before crashing to $0.30. Sister token LUNA, once valued above $120, lost over 98% of its value within days.
Cronje acknowledged the risks in a March 21 post, saying: “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 drew scrutiny from global regulators and led the European Union to include a ban on algorithmic stablecoins in its Markets in Crypto-Assets Regulation (MiCA) bill.
Shift to UAE Dirham-Backed Model
Sonic’s pivot coincides with accelerating digital currency developments in the UAE. In June 2024, the Central Bank of the UAE approved a regulatory framework for dirham-backed stablecoins. Since then, firms including Tether and AED Stablecoin have announced plans to issue UAE dirham-pegged tokens.
The digital dirham will be accepted in all payment channels and operate alongside the physical currency, according to Central Bank Governor Khaled Mohamed Balama. Balama said the CBDC could enhance financial stability, reduce costs, and help combat financial crime.
Following the approval, Tether partnered with Phoenix Group and Green Acorn Investments to launch a fully backed dirham stablecoin. On Nov. 1, The Open Network confirmed the token would be launched on its blockchain.
Sonic Labs’ new currency will enter a competitive field of dirham-based digital assets. The UAE rollout is expected in the fourth quarter of 2025.
