UAE ‘Digital Dirham plan’ A Essential step in the nation’s monetary evolution.
The CBDC strategy was first unveiled in February as part of the central bank’s program to position the UAE as a global financial hub. The Central Bank of the UAE introduced its “The Digital Dirham” Central Bank Digital Currency [CBDC] strategy. The Central Bank of the United Arab Emirates (CBUAE) is getting closer to completely introducing the digital dirham, its central bank digital currency (CBDC), for domestic and cross-border payments.
CBDC is a risk-free digital currency that is issued and guaranteed by the central bank. The Central Bank of the UAE (CBUAE) announced the launch of the CBUAE Central Bank Digital Currency (CBDC) Strategy, one of nine initiatives under the CBUAE’s Financial Infrastructure Transformation (FIT) Programme. For its CBDC implementation, the CBUAE struck a deal with Abu Dhabi’s G42 Cloud and digital finance services provider R3 to be the CBDC implementation’s infrastructure and technology providers. In addition to resolving domestic and cross-border payment issues, the central bank said it would work to increase financial inclusion as the country strives to create a “cashless society.”
The Programme includes nine initiatives, one of which is the launch of a Central Bank Digital Currency. The digital money will aid in tackling the problems associated with domestic and cross-border payments. CBDC will hasten our digitalization and boost financial inclusion. We are excited to investigate the prospects that CBDC will bring to the larger economy and society.
CBDC, as previously said, is a risk-free type of digital money issued and guaranteed by the central bank that serves as a safe, cost-effective, and efficient mode of payment as well as a store of value. CBDC will address the difficulties of domestic and cross-border payments, improve financial inclusion, and propel the UAE towards a cashless society as part of the UAE’s digital transformation.
CBDC is one of the measures included in the CBUAE’s FIT Programme, which will “further establish and strengthen the UAE as a major global financial center as said by CBUAE Governor Khaled Mohamed Balama. “The launch of our CBDC plan is a significant step forward in the evolution of money and payments in the country.”
The first phase of the strategy will consist of three major pillars: the soft launch of mBridge to facilitate real-value cross-border CBDC transactions for international trade settlement; proof-of-concept work for bilateral CBDC bridges with India; and proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage.
The proof-of-concept work for bilateral CBDC bridges with India would be the second primary priority. Finally, the approach will include proof-of-concept work for domestic CBDC issuance, which will include both wholesale and retail usage. Overall, the first phase is projected to be completed within the next 12 to 15 months.
Purpose –
CBUAE’s new strategy aims to strengthen the UAE’s payment infrastructure by adding more robust payment channels and ensuring a resilient and stable financial system. Most crucially, assure the UAE’s readiness to connect payment infrastructures with the future potential tokenization world, including the tokenization of financial and non-financial activities.
