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UAE central bank to issue CBDC as part of its financial transformation program

02/14/2023
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The Central Bank of the United Arab Emirates (CBUAE) is planning to launch a central bank digital currency (CBDC) for cross-border and domestic use as part of the first of its newly-launched financial infrastructure transformation (FIT) program. 

In a recent announcement, the CBUAE introduced the FIT program and highlighted its aim to support the country’s financial services sector. The central bank highlighted that the program would promote digital transactions and enable the UAE’s competitiveness as a financial and digital payment hub.

The first stage of the FIT program includes the issuance of a CBDC. According to the central bank, the issuance of a CBDC would “address the problems and inefficiency of cross-border payments and help drive innovation for domestic payments, respectively.” According to Khaled Mohamed Balama, Governor of the CBUAE, the FIT program will “support a thriving UAE financial ecosystem and its future growth.“ 

Apart from a CBDC, the government is also planning to launch a unified card payment platform to “facilitate the growth of e-commerce” and an instant payments platform to “support financial inclusion and enable a cashless society” during the first stage of the program.

The FIT program has nine initiatives, including the ones that will be implemented in the first stage. Initiatives after the first stage include an e-Know Your Customer platform and an innovation hub.

Related: Lawyer explains new federal virtual asset law in the United Arab Emirates

On Feb. 7, Dubai’s virtual asset regulatory authority (VARA) released its long-awaited “Full Market Product Regulations,” which includes comprehensive guides on virtual asset activities for projects operating within the emirate. The laws include a ban on issuing “anonymity-enhanced cryptocurrencies,” also commonly dubbed as “privacy coins,” and related activities.

On Feb. 10, various players within the UAE expressed their sentiments in response to the new development. Saqr Ereiqat, the co-founder of Crypto Oasis, recently told Cointelegraph that privacy coins are different from Bitcoin (BTC) and Ether (ETH), where transactions can be traced. The executive said that they present a unique challenge as they could potentially enable illicit activities.