The Central Bank of the UAE (CBUAE) has announced the launch of its Central Bank Digital Currency (CBDC) strategy called ‘The Digital Dirham’. The move towards a cashless society is one of nine initiatives of the CBUAE’s Financial Infrastructure Transformation (FIT) Programme.
Infrastructure and technology providers
G42 Cloud and R3 will provide the infrastructure and technology for the CBDC, which will be a risk-free form of digital money with the guarantee of the central bank. G42 Cloud is a leading provider of cloud and AI technologies in the UAE, while R3 is a global enterprise blockchain software firm.
Digital Dirham: Three main pillars
The first phase of the CBDC strategy will focus on three main pillars. The first is the soft launch of mBridge, which will facilitate real-value cross-border CBDC transactions for international trade settlement. The second is proof-of-concept work for bilateral CBDC bridges with India, and the third is proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage. The initial phase will take place over the next 12 to 15 months.
Benefits of CBDC
According to an emailed statement by the central bank, CBDC is a secure, cost-effective, and efficient form of payment and a store of value, addressing the issues around domestic and cross-border payments. It will also enhance financial inclusion and move towards a cashless society. CBDC should strengthen the UAE’s payment infrastructure, promote financial inclusion, and enhance cross-border trade settlement.
Governor’s statement
“CBDC 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. We look forward to exploring the opportunities that CBDC will bring to the wider economy and society,” CBUAE governor Khaled Mohamed Balama said.
Previous initiatives
Previously, the Central Bank has achieved several successful CBDC initiatives in recent years, including Project “Aber” with the Saudi Central Bank in 2020. Other successful initiatives include the launch of the first real-value cross-border CBDC pilot under the ‘mBridge’ Project with the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People’s Bank of China, and the Bank for International Settlements in 2022.
Conclusion
The UAE’s launch of ‘The Digital Dirham’ represents a significant step towards a cashless society, enhancing cross-border trade settlement, and promoting financial inclusion. With the support of G42 Cloud and R3, the CBUAE should successfully implement its CBDC strategy, further solidifying the UAE as a leading global financial hub.
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Source: https://cryptoticker.io/en/uae-launches-the-digital-dirham-2023/