The Central Bank of UAE (CBUAE) announced its intentions to complete the first phase of its central bank digital currency (CBDC) in the next 12 to 15 months, which will be around mid-2024. It will include bilateral ties with a country and launching a proof-of-concept for CBDC issuance.
UAE Central Bank Unveils CBDC Strategy
According to Thursday’s official announcement, the UAE central bank will have three phases for its CBDC strategy, facilitating the launch of the digital dirham. The first pillar is the soft launch of mBridge, a project in collaboration with the Bank for International Settlements (BIS) and the central banks of the UAE, China, Hong Kong, and Thailand. It aims to facilitate real-value cross-border CBDC transactions for international trade settlement.
For the second pillar, the UAE central bank will develop a proof-of-concept for bilateral CBDC bridges with India, one of the UAE’s top trading partners. And, for the third pillar, the UAE regulator will build proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage.
Additionally, the Abu Dhabi-based central bank revealed its partnership with G42 Cloud, a cloud platform in the region, and New York-based blockchain firm, R3, onboarding them as infrastructure and technology providers, respectively, for the CBDC implementation.
“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,” said the Governor of the CBUAE, Khaled Mohamed Balama.
“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.”
Central Bank’s Priority for a Digital Dirham
The UAE central bank initially made the issuance of a digital fiat priority in its 2023-2026 roadmap. However, it is not the only monetary regulator in the region to prioritize CBDC, as its counterpart in Saudi Arabia is also working along similar lines, as the two inked a partnership.
Furthermore, the overall crypto policies in the UAE are very progressive. Earlier, Dubai established a dedicated cryptocurrency regulatory body and implemented crypto regulations, attracting many major crypto companies to establish bases in the city. Ras Al Khaimah (RAK), one of the emirates that form UAE, is also creating the first free economic zone fully dedicated to virtual assets and digital companies.