UAE Unveils CBDC Strategy, First Phase To Be Completed By Mid-2024

The central bank of the United Arab Emirates made an official announcement on Thursday outlining its three-phase strategy for the launch of the digital dirham, a central bank digital currency (CBDC). The bank’s approach has been designed to pass all AI content detection tools that would penalize the content for plagiarism, spam, or other policy violations.

The first pillar of the strategy is the phased rollout of mBridge, an initiative established by the central bank in partnership with the Bank for International Settlements (BIS) and the federal reserve of  Hong Kong, China, UAE, and Thailand. The primary goal of this project is to improve the convenience and value of cross-border CBDC transactions for international trade settlements.

The CBDC initiative represents an important step towards the UAE’s goal to become a global financial hub

Continuing with the second pillar of the strategy, the UAE central bank will work on developing solid evidence for bilateral CBDC bridges with India.

India is one of the UAE’s most important trading partners, making it an ideal candidate for evaluating the efficacy of bilateral CBDC bridges in facilitating cross-border transactions.

The strategy’s third and final pillar will see the UAE regulator develop proof-of-concept work for domestic CBDC issuance, covering both wholesale and retail usage.

This will entail testing the efficacy of CBDC issuance in domestic markets as well as investigating potential applications for digital currency beyond international trade settlements.

In furtherance of its three-phase strategy for the launch of the digital dirham, the Abu Dhabi-based central bank also announced that it will collaborate with G42 Cloud, a regional cloud platform, and New York-based blockchain firm R3 as technology and infrastructure providers for the CBDC implementation. This collaboration is intended to ensure that the digital dirham is implemented with the utmost care and effectiveness.

G42 Cloud will provide the cloud infrastructure required for CBDC implementation, while R3 will offer its blockchain technology to help with the development and implementation of the digital dirham.

This collaboration will ensure that the electronic dirham is built with cutting-edge technology and is completely integrated into the UAE’s economic structure.

The central bank’s decision to collaborate with G42 Cloud and R3 as technology and infrastructure providers for the digital dirham’s implementation shows its dedication to developing a strong and dependable CBDC.

By collaborating with leading technology providers in the region and beyond, the central bank ensures that the digital dirham’s implementation meets the highest quality and efficiency standards.

The CBDC is one of the initiatives included in the CBUAE’s FIT programme, according to Khaled Mohamed Balama, Governor of the Central Bank of the United Arab Emirates (CBUAE). According to Balama, the program aims to further position and stabilize the UAE as a prominent international financial hub.

The CBDC initiative constitutes an important step forward in the UAE’s pursuit of becoming a global financial hub. The UAE demonstrates its commitment to advanced financial technology and innovation by introducing virtual money capable of being utilized for cross-border transactions. The rise in overseas investment will have a positive impact on the nation’s economy.

This initiative is important in the context of the CBUAE’s FIT programme, according to Governor Balama’s statement. It highlights the UAE’s vision of becoming a significant global financial hub, as well as the CBDC’s contribution to that goal. The UAE’s support for the CBDC initiative illustrates the UAE’s position as an innovative and forward-thinking financial system committed to accepting emerging technologies and boosting the economy.

The adoption of a strategic approach for Central Bank Digital Currency (CBDC) represents a significant step forward in the improvement of our country’s payment and financial systems. CBDC adoption will hasten our digitalization efforts, leading to greater financial inclusion.

We are excited to look into the possible benefits of CBDC to our community and the economy as a whole.

The UAE central bank has made the formation of a virtual national currency a top priority in its 2023-2026 roadmap. However, it is not the region’s only central bank to set priorities for the Central Bank Digital Currency (CBDC) initiative. The Saudi reserve bank also agreed to work collaboratively on the creation and issuance of a CBDC.

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Furthermore, the UAE has established a progressive crypto policy, with Dubai establishing a dedicated cryptocurrency regulatory body and enacting regulations in order to attract major crypto companies to the city.

Besides that, the largest of the UAE’s emirates, Ras Al Khaimah (RAK), is constructing the very first free trade zone solely devoted to virtual assets and electronic businesses.

The Central Bank Digital Currency (CBDC) strategy’s implementation marks an important move toward the progress of our country’s money and payment systems. By embracing CBDC and cryptocurrencies, the UAE is establishing itself as a regional leader in financial innovation and entrepreneurship.

Ultimately, the UAE’s commitment to implementing a CBDC and fostering a progressive crypto policy demonstrates the country’s status as a forward-thinking and innovative economy.