UAE Central Bank Partners with G42 Cloud and R3 to Implement Digital Dirham Strategy
The United Arab Emirates (UAE) Central Bank has announced that it has commenced the implementation of its digital currency strategy. This initiative will be carried out in partnership with Abu Dhabi's G42 Cloud and digital finance services provider R3. According to the central bank, the project aims to address the “pain points” in domestic and cross-border payments, facilitate a cashless society, and strengthen the country's payment infrastructure.
Reports from Arabian Business state that the central bank will focus on three crucial pillars during the first phase of its strategy, predicted to occur within 12-15 months. These consist of the soft launch of the M-bridge, the domestic CBDC proof-of-concept work, and the bilateral central bank digital currency (CBDC) bridges with India (proof-of-concept).
Khaled Balama, Governor of the UAE Central Bank, said that the launch of the CBDC strategy is a significant milestone "in the evolution of money and payments in the country. The CBDC will accelerate the country's digitalization journey and promote financial inclusion."
The Digital Dirham aims to "ensure the readiness of the UAE to integrate payment infrastructures with the future potential tokenization world and the tokenization of financial and non-financial activities."
This initiative is part of the Central Bank's Financial Infrastructure Transformation Programme, launched in February. UAE Central Bank hopes that this strategy will help the UAE cement its position as a global financial center.
CBDCs are the digital versions of government-issued money, designed to facilitate the exchange of digital assets. They are similar to cryptocurrencies but their fixed value is set by the monetary authority. The fact that cryptocurrencies are incredibly volatile, CBDCs are an excellent approach to mitigate their risk.
US-based think tank Atlantic Council reports that as of March 1, 2023, 65 countries are developing CBDCs, with more than 20 central banks already launching pilot programs.
CBW - External Analyst