The Central Bank of the UAE (CBUAE) is moving closer to launching its central bank digital currency (CBDC), the ‘Digital Dirham’, for domestic and cross-border payments.
According to an announcement on March 23, CBUAE signed an agreement with G42 Cloud Abu Dhabi and digital financial service provider R3 to be the provider of infrastructure and technology for the implementation of CBDC.
In addition to addressing domestic and cross-border payment challenges, it will also help increase financial inclusion as the country looks to become a “cashless society.”
The first phase of the CBDC strategy includes the soft launch of the “mBridge” that facilitates CBDC transactions for international trade, along with proof-of-concept work for a bilateral CBDC bridge with India and domestic CBDC issuance for wholesale and retail. This phase is expected to be completed in the next 12 to 15 months, the announcement said.
During the initial launch of the strategy on February 12, CBUAE governor Khaled Mohamed Balama noted:
“The launch of our CBDC strategy marks an important step in the evolution of money and payments in the country. The CBDC will accelerate the digitalization journey and promote financial inclusion.
While the UAE appears to be pushing the boundaries of CBDC use cases, the debate over the viability of the asset in the United States continues.
related: India, UAE to explore CBDC bridge to facilitate trade, remittance without USD
On March 21, Republican Senator Ted Cruz introduced a bill to block the United States Federal Reserve from issuing “direct-to-consumer” CBDC for fear of becoming a spying tool.
Meanwhile, a study released by the US Treasury division stated that integrating CBDC into the economy would damage banks, citing the harm it could cause to “essential” banking in times of stress.
Nigeria on the other hand is witnessing an increase in the use of eNaira, as the fiat currency is experiencing a severe shortage. The total number of CBDC wallets in Nigeria is 13 million, an increase of more than 12 times compared to the number in October 2022.
In March, 114 countries, representing more than 95% of global GDP, explored CBDC. 65 countries are already at an advanced stage, according to the US-based Atlantic Council think tank.