Khaleej Times, Thursday, Mar 23, 2023 | Ramadan 1, 1444
UAE Central Bank moves a step closer to digital currency launch
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.