Jai Sahu
The United Arab Emirates (UAE) is gearing up to introduce a central bank digital currency (CBDC) for both retail and wholesale transactions, as announced by the Central Bank of UAE (CBUAE) on Saturday.
The national bank commenced its digital dirham implementation plan during a signing event on March 23, partnering with R3 and G42 Cloud as providers for the CBDC’s infrastructure and technology.
Introducing a CBDC in the UAE
R3, a significant developer in CBDC technology, has participated in several Bank of International Settlements (BIS) projects. Meanwhile, G42 Cloud is affiliated with the AI holding company G42, which entered a cooperation with OpenAI for financial services technology in October.
“CBDC will help address the challenges of domestic and cross-border payments, enhance financial inclusion, and propel the move towards a cashless society,” stated the CBUAE in their weekend announcement.
The latest update to our CBDC Tracker shows that all of the founding members of BRICS are in the pilot phase of CBDC exploration.
New members–Saudi Arabia, Iran and the UAE–are also developing wholesale CBDCs.
Check out more of our takeaways: https://t.co/WORkdfYL09 pic.twitter.com/CBJHSVp5sg
— Atlantic Council GeoEconomics Center (@ACGeoEcon) March 25, 2024
The initial phase of UAE CBDC implementation is among nine initiatives in the CBUAE’s Financial Infrastructure Transformation (FIT) Programme, featuring three “pillars” to be developed over the next 12 to 15 months.
The first pillar is the soft launch of mBridge, facilitating real-time cross-border transactions to settle international trades. Last month, the central bank conducted its first cross-border transaction using the digital dirham and Chinese digital yuan, amounting to $13.6 million, via mBridge.
Following this, the bank will embark on proof of concept endeavors for CBDC bridges with India, where the Reserve Bank is advancing in the technology surrounding its own CBDC privacy. Subsequently, the bank will initiate proof of concept work concerning domestic CBDC use cases, including retail and wholesale payments.
Why CBUAE Wants A Digital Dirham
Apart from fortifying the nation’s payment infrastructure, CBUAE asserts that CBDC will prepare the country for a potential “tokenized” future, where blockchain-based tokens are widely used for financial and non-financial purposes.
“CBDC will accelerate our digitalization journey and promote financial inclusion,” remarked CBUAE Governor H.E. Khaled Mohamed Balama. “We anticipate exploring the opportunities CBDC will bring to the broader economy and society.”
Last month, Bridge Tower Capital and Deus X established a $250 million joint venture to develop digital asset infrastructure in the UAE. The venture, named BridgeTower Middle East, aims to promote institutional crypto adoption across the region.