Key takeaways:
- The Central Bank of the UAE unveiled “The Digital Dirham,” its Central Bank Digital Currency plan.
- CBDC is a risk-free digital currency that the central bank issues and backs.
The Central Bank of the UAE unveiled its “The Digital Dirham” plan, which uses Central Bank Digital Currency (CBDC), on Thursday, March 23. To provide the necessary technology and infrastructure for its digital currency initiative, the CBUAE has partnered with G42 Cloud and R3.
The bank recently introduced the Financial Infrastructure Transformation [FIT] initiative. As previously noted last month, the initiative aims to quicken the digital transformation rate in the financial services industry. By advancing digital transactions and supporting ecosystem innovation, it will achieve this. The UAE’s chances of becoming a center for financial and electronic payments are anticipated to improve.
The program consists explicitly of nine projects, one of which is introducing a central bank digital currency. The difficulties associated with domestic and international payments will be addressed with the aid of digital currency. Additionally, it will support the UAE’s transition to a cashless culture and improve financial inclusion. The CBUAE’s Governor, Khaled Mohamed Balama, is quoted as stating more about the matter:
“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.”
Three significant elements will focus on the CBDC Strategy’s initial phase: the soft launch of mBridge, proof-of-concept work for mutual CBDC bridges with India, and proof-of-concept work for domestic CBDC issuance spanning wholesale and retail usage. Real-value cross-border CBDC transactions for the settlement of foreign trade will be made possible by mBridge.
The initial period will last for the following 12 to 15 months. The proof-of-concept work for the bilateral CBDC bridges with India will be the second main area of emphasis. The plan will also consider the wholesale and retail usage of the local CBDC issuance proof-of-concept work.
CBDC is a risk-free digital currency that the central bank issues and backs. It also serves as a store of value and is a secure, affordable, and effective payment method, addressing the problems associated with domestic and international payments. Additionally, it will advance a cashless society, reinforce the UAE’s payment infrastructure, and improve financial inclusion.
The first real-value cross-border CBDC trial will be introduced in 2022 as part of the mBridge Project, including 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.
