The Central Bank of the United Arab Emirates (CBUAE) is forging ahead with the development of its central bank digital currency (CBDC). The banking regulator recently signed a deal with G42 Cloud and finance service provider R3 to bring its plans for a digital dirham to fruition. Abu Dhabi-based G42 Cloud will be responsible for providing infrastructure for CBUAE’s digital dirham while R3 will offer distributed ledger technology services for the project.
During the signing ceremony, the CBUAE confirmed the first arm of the strategy will involve a soft launch of mBridge to improve the state of cross-border transactions.
Back in 2022, the UAE took part in the mBridge pilot organized by the Bank for International Settlements (BIS) focused on using CBDCs for international transactions. Other participants in the study included the People’s Bank of China (PBoC), the Bank of Thailand, and the Hong Kong Monetary Authority with participants hailing the results of the study.
In line with the cross-border functionalities, the CBUAE confirmed that it will be conducting a proof-of-concept for the possibility of a CBDC bridge with India. It appears that UAE’s central bank will be exploring the feasibility of both retail and wholesale CBDCs as it looks to improve its local financial system.
CBDC is one of the initiatives that is part of the CBUAE’s FIT program, which will further position and solidify the UAE as a leading global financial hub,” said CBUAE Governor Khaled Mohamed Balama. “The launch of our CBDC strategy marks a key step in the evolution of money and payments in the country.”
In February, the CBUAE unveiled its Financial Infrastructure Transformation (FIT) comprising nine initiatives designed to improve the digital economy of the oil-rich country. Aside from CBDC development, the central bank is keen on exploring a card domestic scheme, open finance, an instant payment platform, a financial cloud, and an innovation hub for fintech firms.
Just a matter of time for CBDCs
CBDCs are the rave of the moment with several countries ramping up their efforts to launch their versions. Thailand, Indonesia, Russia, and India are all exploring the offering with the primary aim of complementing existing payment mechanisms and improving remittances.
The European Union is not left out of the dash to launch CBDCs as the digital euro is expected to be launched in 2026. China’s digital yuan is nearing a full-scale launch with the PBoC adding new functionalities to the CBDC to allow it to compete favorably with Alipay, WeChat Pay, and China UnionPay.
Meanwhile in the U.S., Congressman Tom Emmer warns that a digital dollar would hurt the privacy rights of American citizens and their individual sovereignty.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: CBDCs and BSV
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