Sonic Labs Has Abandoned Its Plan to Introduce a US Dollar-Pegged Algorithmic Stablecoin

The decision, announced by co-founder Andre Cronje, comes just days after the company initially revealed its work on a high-yield USD stablecoin.

Sonic Labs has abandoned its plan to introduce a US dollar-pegged algorithmic stablecoin and will instead focus on a digital asset linked to the UAE dirham, co-founder Andre Cronje announced.

The decision comes just days after the company initially revealed its work on a high-yield USD stablecoin. However, Cronje now says the upcoming project will be a “numerical Dirham” that is tied to USD but not an algorithmic stablecoin.

This change in direction coincides with the UAE’s preparations for its own digital dirham, which is set to launch as a central bank digital currency (CBDC) in late 2025. Authorities expect the blockchain-based currency to enhance financial security and integrate seamlessly with existing payment systems.

The country’s central bank, the Central Bank of the UAE (CBUAE), is currently conducting the final stages of testing and preparing for the digital dirham’s debut.

Sonic Labs’ reversal also reflects growing skepticism around algorithmic stablecoins, particularly after the dramatic collapse of TerraUSD (UST) in 2022.

That incident, which occurred in May of last year, saw the complete wipeout of billions in value and reinforced concerns about the risks associated with such models. Cronje himself has previously expressed hesitancy, admitting concerns over past failures in the sector.

In response to the crisis, regulators have taken steps to prevent similar occurrences. The European Union, for instance, has introduced the Markets in Crypto Assets (MiCA) framework, which imposes strict controls on algorithmic stablecoins to safeguard financial stability.

Meanwhile, market data from CCData suggests that stablecoins are increasingly being used for everyday transactions rather than large-scale capital movement, indicating a shift in how these digital assets function within the economy.