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The United Arab Emirates (UAE) is currently preparing a central bank digital currency (CBDC) for both retail and wholesale applications, as stated in an announcement from the Central Bank of UAE (CBUAE) on Saturday.
The national bank initiated its digital dirham implementation strategy during a signing ceremony on March 23 with R3 and G42 Cloud, the firms designated to provide the infrastructure and technology for the digital currency.
Implementing A UAE CBDC
R3 is a prominent developer of CBDC technology that has participated in various projects with the Bank of International Settlements (BIS). In addition, G42 Cloud is a subsidiary of the AI holding company G42, which entered into a partnership with OpenAI to advance financial services technology in October.
“As part of the UAE’s digital transformation, CBDC will help address the challenges of domestic and cross-border payments, improve financial inclusion, and facilitate the transition to a cashless society,” the CBUAE stated over the weekend.
The latest update to our CBDC Tracker indicates that all founding members of BRICS are currently in the pilot phase of CBDC exploration.
New members—Saudi Arabia, Iran, and the UAE—are also in the process of 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 the UAE CBDC implementation is one of nine initiatives within the CBUAE’s Financial Infrastructure Transformation (FIT) Programme. It also includes three “pillars” that are set to be developed over the next 12 to 15 months.
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The first is the soft launch of mBridge, which will assist the bank in enabling real-time cross-border transactions for settling international trades. Last month, the central bank successfully executed its inaugural cross-border transaction using the digital dirham and the Chinese digital yuan, valued at $13.6 million, via mBridge.
Subsequently, the bank will commence proof of concept work on CBDC bridges with India, where the Reserve Bank is advancing technology related to the privacy of its own developing CBDC. Lastly, the bank will initiate proof of concept work concerning domestic CBDC applications, including retail and wholesale payments.
Why CBUAE Wants A Digital Dirham
In addition to enhancing the nation’s payment infrastructure, CBUAE asserts that it will equip the country for a potential “tokenized” future, where individuals engage with blockchain-based tokens for both financial and non-financial activities.
“CBDC will accelerate our digitalization journey and promote financial inclusion,” remarked CBUAE Governor H.E. Khaled Mohamed Balama. “We look forward to exploring the opportunities that CBDC will bring to the broader economy and society.”
Last month, Bridge Tower Capital and Deus X initiated a $250 million joint venture aimed at developing digital asset infrastructure in the UAE. The venture, BridgeTower Middle East, advocates for institutional crypto adoption throughout the region.
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