The launch of the Digital Dirham will address the problem and inefficiency of cross-border payments and drive innovations for domestic payments
Published: Thu 23 Mar 2023, 11:15 AM
The Central Bank of UAE (CBUAE) has signed a deal with G42 Cloud and R3 to provide infrastructure and technology to commence implementation of the Central Bank Digital Currency (CBDC) Strategy, one of the nine initiatives of the CBUAE’s Financial Infrastructure Transformation (FIT) Programme.
The launch of the Digital Dirham will address the problem and inefficiency of cross-border payments and drive innovations for domestic payments.
This comes after the UAE and Saudi Arabia central banks’ several successful initiatives confirmed the possibility of using a digital currency issued by two central banks to settle cross borders payments.
In addition, significant progress was made in the first real-value cross-border CBDC pilot project with 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 in 2022.
“The UAE Central Bank is now ready to enter into the next major milestone of the CBDC journey and implement its CBDC Strategy. The first phase of CBUAE’s CBDC Strategy, which is expected to [be completed] over the next 12 to 15 months, comprises 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 finally, proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage,” the Central Bank said on Thursday.
“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. CBDC will accelerate our digitalisation journey and promote financial inclusion. We look forward to exploring the opportunities that CBDC will bring to the wider economy and society,” said Khaled Mohamed Balama, the Governor of the CBUAE.
The Central Bank Digital Currency is a risk-free form of digital money issued and guaranteed by the central bank and serves as a secure, cost-effective and efficient form of payment and a store of value.
As part of the UAE’s digital transformation, CBDC will help address the pain points of domestic and cross-border payments, enhance financial inclusion and move towards a cashless society. It will further strengthen the UAE’s payment infrastructure, providing additional robust payment channels, ensuring a resilient and reliable financial system.
More importantly, the CBUAE aims to ensure the readiness of the UAE to integrate the payment infrastructures with the future potential tokenisation world, and the tokenisation of financial and non-financial activities.
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