The UAE Central Bank has announced the launch of its digital currency strategy, Digital Dirham, which marks a key step in the evolution of money and payments in the country. Digital Dirham is a central bank digital currency (CBDC) that aims to address the pain points of domestic and cross-border payments, enhance financial inclusion and move towards a cashless society. It is also expected to further strengthen the UAE’s payment infrastructure by providing additional channels. The CBDC will accelerate the country’s digitalization journey and promote financial inclusion, said Khaled Balama, Governor of the UAE Central Bank.
The Central Bank has signed an agreement with Abu Dhabi’s G42 Cloud and digital finance services provider R3 to be the infrastructure and technology providers, respectively, for the implementation of Digital Dirham. A CBDC is a digital form of a government-issued currency, which provides a stable means of exchanging digital assets and reduces the risks associated with using cryptocurrency.
The UAE is one of the 18 countries that have made the most progress in CBDCs in 2023, according to the US-based think tank Atlantic Council. Central banks around the world are exploring the development of digital currencies amid the growing popularity of cryptocurrencies.
The Central Bank’s CBDC strategy aims to ensure the readiness of the UAE to integrate payment infrastructures with the future potential tokenization world, as well as the tokenization of financial and non-financial activities. It is expected to boost the competitiveness of the UAE as a central FinTech hub and help address issues such as ensuring maximum inclusion of the population in the banking system and reducing fraud and money laundering.
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