UAE Central Bank Rolls Out Its CBDC Strategy

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After announcing plans to unveil a Central Bank Digital Currency (CBDC) in February, the central bank of the United Arab Emirates (UAE) recently unveiled a new strategy that would provide the infrastructure and technology for the development of the “digital dirham.”

According to a press statement from the central bank released on March 23, one of the nine important initiatives in the nation’s Financial Infrastructure Transformation (FIT) Program is the deployment of a digital version of the dirham under the “The Digital Dirham” concept.

CBUAE also revealed an engagement with G42 Cloud, a cloud services platform from the region, and New York-based blockchain firm R3 as the infrastructure and technology providers respectively.

According to the announcement, the first part of this strategy will take place over the next 12 to 15 months and will consist of three main pillars: a proof-of-concept (PoC) for CBDC bridges with India, a PoC for domestic CBDCs in wholesale and retail, and the soft launch of mBridge for real-value cross-border CBDC transactions in international trade settlements.

Part of the statement detailed the importance of CBDCs stating:

CBDC is a risk-free form of digital money issued and guaranteed by the central bank and serves as a secure, cost-effective and efficient form of payment and a store of value. As part of the UAE’s digital transformation, CBDC will help address the pain points of domestic and cross-border payments, enhance financial inclusion and the move towards a cashless society.

The Governor of the CBUAE, Khaled Mohamed Balama, commented on the most recent developments saying the digital Dirham:

… is one of the initiatives as part of the CBUAE’s FIT programme, which will further position and solidify the UAE as a leading global financial hub. The launch of our CBDC strategy marks a key step in the evolution of money and payments in the country. CBDC will accelerate our digitalisation journey and promote financial inclusion.

Balama also said that the UAE financial regulator was further looking to explore more “opportunities that CBDC will bring to the wider economy and society.”

It is worth remembering that the Reserve Bank of India (RBI) and the UAE’s central bank signed a Memorandum of Understanding (MoU) in mid-March that stated that the two central banks would work together to conduct a PoC and pilots of a bilateral CBDC bridge to ease cross-border CBDC transactions of remittances and trade.

Dubai, one of the UAE’s emirates, has also recently formulated regulations to govern the cryptocurrency sector.

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