Central Bank of UAE Launches CBDC Strategy, Details

Updated: 23 March 2023

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Ongoing digital transformations in the financial sector include the launch of central bank digital currencies (CBDC). Some nations have already launched theirs, while others are still researching and developing.

To embrace this digital era and transform its economy, the United Arab Emirates (UAE) Central Bank has launched its Digital Dirham strategy. This move aims to provide a secure and efficient digital currency platform for citizens and businesses in the country.

Generally, CBDC is a no-risk digital fund from the central bank. It typically serves as an efficient, cost-effective, and secure payment form with State backing.

United Arab Emirates Launches Digital Dirham

The Digital Dirham initiative, launched by the central bank of UAE, aims at developing a modern and secure payment infrastructure that can safely and reliably support digital transactions. This is expected to enhance the efficiency of financial transactions, reduce costs and promote financial inclusion.

According to sources, the CBDC implementation will occur through R3 and G42 Cloud support. Both systems will serve as its technology and infrastructure providers, respectively.

Khaled Mohamed, the governor of the Central Bank of UAE, stated that the implementation of CBDC is part of the bank’s FIT program. He added that introducing this initiative will further solidify and position UAE as a globally recognized hub. He also maintained that the CBDC strategy creates a means for advanced payment and monetary systems in the country.

UAE intends to tackle cross-border and domestic payments issues and facilitate the idea of a cashless society and financial inclusion using CBDC. The country aims to provide extra robust payment options with the new strategy of the Central Bank. It will also ensure a reliable and resilient financial system and payment infrastructure. At its best, the nation will integrate its payment infrastructure with the future world of tokenization.

Based on the governor’s speech, the launch of the Digital Dirham will significantly impact the UAE’s financial landscape. It will help to reduce the country’s dependence on cash, streamline payment processes, and support the growth of the digital economy. The Digital Dirham will also enable the Central Bank to understand better and monitor financial transactions and respond more effectively to changes in the market.

The Methodology Of The Digital Dirham Initiative

According to the bank’s report, the initial phase of the initiative will be completed in the next 12 to 15 months. The first phase will consist of three pillars, including proof-of-concept, which will address matters with the issuance of domestic CBDC for retail and wholesale usage.

It will also include proof-of-concept work, which will address the area of two-sided CBDC connections with India. Lastly, it’ll include the mBridge soft launch that will enhance international transactions with sustainable value.

The Digital Dirham is currently in the testing phase, and it’ll take a while for the public to benefit from the development. The Central Bank will work closely with stakeholders across the UAE to ensure a smooth transition to the new currency.

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