Sonic Labs has pulled the plug on its much-hyped U.S. dollar-pegged algorithmic stablecoin and shifted gears toward launching a dirham-denominated alternative. The decision, made public just one week after the initial announcement, suggests more than a change of heart – it reveals a broader pivot towards stability, opportunity, and perhaps, safer regulatory waters.
As global pressure increases on algorithmic stablecoins following historic failures, Sonic is taking a fresh route – one that aligns with rising digital finance momentum in the United Arab Emirates.
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Why Sonic Labs Dropped the Dollar Plan?
It all started on March 22, when Sonic Labs co-founder Andre Cronje revealed plans for a dollar-based algorithmic stablecoin promising an annual yield of up to 23%. That kind of number would catch anyone’s attention, especially in a market still nursing wounds from past collapses.
But barely a week passed before the brakes were slammed on that idea:
Cronje’s tone hinted at deeper hesitations, and they weren’t baseless. The Terra’s collapse still haunts the crypto world. Back in May 2022, the TerraUSD algorithmic stablecoin lost its peg and cratered to $0.30. Its sibling token, LUNA, dropped from over $120 to less than $1. That crash wiped out $40 billion in value and triggered scrutiny from investors and lawmakers worldwide.
Algorithmic Stablecoins Face Crackdown as U.S. Bills Loom
The Terra collapse rattled more than portfolios – it shook confidence in the entire concept of algorithmic models. Ever since, regulators have been sharpening their knives, especially in the U.S., where proposed laws like the GENIUS Act and the STABLE Act demand stablecoins be backed by 1:1 reserves.
There’s no tolerance left for clever math that risks unraveling overnight. Both bills reject algorithmic models entirely and are being fast-tracked. One of them will land on the Financial Services Committee’s desk on April 2, according to Bloomberg.
Meanwhile, political momentum around stablecoin laws is building. Senators Bill Hagerty and Tim Scott introduced the GENIUS Act earlier in March, and by the 13th, it had already cleared the Senate Banking Committee with bipartisan support. That spells serious changes ahead.
Read also: Tether Is Preparing First Full Audits For USDT Transparency
Sonic Onboard the UAE’s Digital Dirham Coming Q4 2025
While regulators in Washington are playing defense, the United Arab Emirates is sprinting ahead. On its own timetable, the UAE is preparing to launch a national digital dirham in Q4 of 2025. The digital currency will live alongside its physical counterpart and be accepted in all payment channels, according to UAE Central Bank Governor Khaled Mohamed Balama.
Khaled believes blockchain-based money can help boost financial stability and crack down on financial crime. That kind of forward-thinking environment offers a safe haven for companies like Sonic Labs looking to innovate without feeling the regulatory walls closing in. The UAE isn’t just open for business – it’s rolling out the red carpet for blockchain-based financial tools.
Cronje’s rebranding of Sonic’s new project as a “mathematically bound numerical Dirham” might be his way of stepping away from risky tags like “stablecoin”, especially when regulators associate the term with volatility and past collapses.
Will Dirham Adoption Mark Sonic’s Success?
Sonic’s original plan never had smooth sailing. From the moment the dollar-pegged algorithmic stablecoin was announced, critics started circling. It wasn’t just because of Terra’s collapse – it was the model itself. The idea of using algorithms rather than physical reserves to maintain a stable value feels like a gamble to many. Once bitten, twice shy.
Andre Cronje’s quick reversal came off as a response to that chorus of disapproval. And considering the level of scrutiny surrounding algorithmic coins right now, a course correction might be the smartest move Sonic could make.
There’s also a shift happening in how stablecoins are used. David Pakman, managing partner at CoinFund, pointed out:
“we’ve seen a significant decrease in the size of each stablecoin transaction, which points to the fact that they are being used more as payments and less for large transfers.”
That might explain Sonic’s turn toward a local, practical currency like the dirham – it’s more suited for daily use.
Read also: WLFI Quietly Tests USD1 Stablecoin – Here’s What We Know
