The United Arab Emirates (UAE) is set to become the latest country to roll out its central bank digital currency (CBDC) as part of its Financial Infrastructure Transformation Program.
Furthermore, the Central Bank of UAE (CBUAE), has announced the first phase of its Digital Dirham strategy, with completion expected by mid-2024.
The first phase of the Digital Dirham will include proof-of-concept work for a wholesale and retail CBDC. To achieve this, the CBUAE has partnered with G42 Cloud, a cloud platform from the region, and New York-based blockchain firm R3 as the infrastructure and technology providers.
Plus, the CBUAE has also revealed three central pillars for the first phase of the Digital Dirham.
The first pillar is the soft launch of the mBridge project, a collaboration between the Bank for International Settlements (BIS) and the central banks of Hong Kong, the Chinese mainland, the United Arab Emirates, and Thailand. It will study cross-border payments and multi-CBDC transactions.
The second pillar is proof-of-concept work for a bilateral CBDC bridge with India. A third pillar is proof-of-concept work for a domestic wholesale and retail CBDC, which was first announced last month.
Completing the first phase of the Digital Dirham is expected to take place over the next 12 to 15 months. With this move, the UAE joins the growing list of countries exploring CBDCs to modernize their financial infrastructure. The digital dirham is one of nine key initiatives of the UAE’s Financial Infrastructure Transformation Program.
The introduction of the Digital Dirham is expected to provide numerous benefits, including reduced transaction costs, increased financial inclusion, and enhanced security. It will also enable the UAE to keep up with global trends in the financial sector, particularly as digital payments continue to gain traction.
As such, the UAE’s Digital Dirham is a significant development in its efforts to modernize its financial infrastructure.
As the world continues to move towards digital payments, introducing a CBDC is essential to stay relevant and competitive in the global financial landscape.
