The Central Bank of UAE (CBUAE) jointly held a signing ceremony with G42 Cloud and R3 to mark the implementation of the CBUAE Central Bank Digital Currency (CBDC) Strategy – the Digital Dirham – one of the nine initiatives of the CBUAE’s Financial Infrastructure Transformation (FIT) Program.
The CBUAE has engaged with G42 Cloud and R3 as the infrastructure and technology providers respectively for its CBDC implementation.
The first phase of CBUAE’s CBDC Strategy, which is expected to complete 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, one of the UAE’s top trading partners and finally, proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage.
CBDC 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.
Read more: CBUAE issuing new CBDC
Enhancing financial inclusion
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 and 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 tokenization world, the tokenization of financial and non-financial activities.
Key step
Khaled Mohamed Balama, the Governor of the CBUAE, said, “CBDC is one of the initiatives as part of the CBUAE’s FIT program, 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 digitalization journey and promote financial inclusion. We look forward to exploring the opportunities that CBDC will bring to the wider economy and society.”
Successful initiatives
Following several successful CBDC initiatives including Project “Aber” with the Saudi Central Bank in 2020, which confirmed the possibility of using a digital currency issued by two central banks to settle cross borders payments and was awarded the Global Impact Award by Central Banking Magazine, in addition to the first real-value cross-border CBDC pilot under the “mBridge” 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 CBUAE is now ready for entering into the next major milestone of the CBDC journey and implementing its CBDC Strategy.
In February, The Central Bank of the UAE (CBUAE) announced the launch of its new Financial Infrastructure Transformation (FIT) program, which includes plans to issue its own central bank digital currency (CBDC) for cross-border and domestic use.
The new FIT program is meant to “accelerate the digital transformation in the financial services sector as part of a wider plan aimed at enabling the CBUAE to be among the top central banks internationally,” as per a news statement from the CBUAE.
On Monday, CBUAE and the Reserve Bank of India (RBI) signed a memorandum of understanding (MoU) in Abu Dhabi designed to foster innovation in financial services, including CBDCs.
For more on tech-related news, click here.
