The Central Bank of the United Arab Emirates (CBUAE) said its Digital Dirham would launch for retail use in the final quarter of 2025.

According to a March 27 statement, the currency would be available through regulated banks, fintech companies, exchange houses, and licensed financial firms.

Once live, the Digital Dirham will support smart contracts and tokenization—features that enable automated, secure, and complex transactions while expanding access to digital financial tools.

CBUAE Governor Khaled Mohamed Balama said:

“It is anticipated that the Digital Dirham as a blockchain based platform with cutting edge capabilities shall substantially enhance financial stability, inclusion, resilience, and combatting financial crime. It will further enable the development of innovative digital products, services, and new business models, while reducing cost and increasing access to international markets.”

This move represents a significant step forward in the UAE’s broader digital transformation strategy.

Digital Dirham design

The UAE has also introduced updated symbols for its national currency to align with its growing focus on digital finance.

The new symbol for the physical Dirham features a bold capital “D” crossed by two horizontal lines. These lines represent the country’s vision for economic stability and growth. The design takes cues from the national flag, reinforcing the UAE’s confidence in its financial future. For the digital version, a circular frame in the UAE flag’s colors surrounds the “D” symbol.

The design is intended to reflect the country’s ambition to lead in blockchain innovation and digital financial services.

Balama described the updated branding as a signal of progress and a key part of the country’s digital agenda. He emphasized that the Digital Dirham will improve financial resilience, inclusion, and regulatory oversight while enabling the development of new products and services.

Meanwhile, this announcement follows the CBUAE’s recent membership in the Global Foreign Exchange Committee. It is the first central bank in the Arab world to join the group, which promotes transparency and integrity in global FX markets.

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

On March 22, Sonic Labs co-founder Andre Cronje said the company was working on a US dollar-pegged algorithmic stablecoin with an annual percentage rate (APR) of up to 23%, Cointelegraph reported.

However, one week later, the firm reversed course.

“We will no longer be releasing a USD based algorithmic stable coin,” Cronje said in a March 28 X post. “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 stable coin.”

The shift in strategy comes shortly after the UAE announced it would launch its digital dirham central bank digital currency (CBDC) in the fourth quarter of 2025.

Khaled Mohamed Balama, governor of the Central Bank of the UAE, said the blockchain-based dirham could enhance financial stability and help combat financial crime. The digital currency will be accepted alongside its physical counterpart in all payment channels, according to a report from the Khaleej Times.

Related: Paolo Ardoino: Competitors and politicians intend to ‘kill Tether’

Sonic faced criticism over stablecoin plans

The reversal follows widespread criticism of Sonic’s original plan to launch an algorithmic stablecoin — a model that has raised concerns across the crypto industry since the collapse of the Terra ecosystem in 2022.

Cronje himself previously admitted to experiencing Post-traumatic stress disorder (PTSD) related to algorithmic stablecoin due to previous cycles:

“Pretty sure our team cracked algo stable coins today, but previous cycle gave me so much PTSD not sure if we should implement.”

In May 2022, the $40 billion Terra ecosystem collapsed, erasing tens of billions of dollars of value in a matter of days. Terra’s algorithmic stablecoin, TerraUSD (UST), had been yielding an over 20% annual percentage yield (APY) on Anchor Protocol prior to its collapse.

As UST lost its dollar peg, crashing to a low of around $0.30, Terraform Labs co-founder Do Kwon took to X (then Twitter) to share his rescue plan. At the same time, the value of sister token LUNA — once a top 10 crypto project by market capitalization — plunged over 98% to $0.84. LUNA was trading north of $120 in early April 2022.

Related: Tether’s US treasury holdings surpass Canada, Taiwan, ranks 7th globally

The collapse of the algorithmic stablecoin issuer created shockwaves among both crypto investors and lawmakers.

To reduce systemic risk, the European Union’s Markets in Crypto-Assets Regulation (MiCA) bill will prohibit algorithmic stablecoins to avoid another Terra-like failure.

Meanwhile, stablecoins are increasingly being used for smaller, everyday payments rather than large transfers, according to CoinFund managing partner David Pakman.

“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,” Pakman said during Cointelegraph’s Chainreaction live show on X on March 27.

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