The Central Bank of the United Arab Emirates (CBUAE) is moving closer to fully launching its central bank digital currency (CBDC), the digital dirham, for domestic and cross-border payments.
Important step in the evolution of money
According to an announcement on March 23, the CBUAE signed an agreement with Abu Dhabi’s G42 Cloud and digital financial services provider R3. They will be the infrastructure and technology providers of the CBDC implementation.
In addition to tackling the challenges of domestic and cross-border payments, the central bank says it will also help drive financial inclusion. The country seems to be becoming a “cashless society”.
The first phase of the CBDC strategy consists of the soft launch of “mBridge”, which enables CBDC transactions for international trade. Also launched is a proof-of-concept for bilateral CBDC bridges with India, and domestic CBDC issuance for wholesale and retail. This phase is expected to be completed in the next 12-15 months, the announcement said.
During the first disclosure of the strategy on February 12, CBUAE Governor Khaled Mohamed Balama said:
“The launch of our CBDC strategy marks an important step in the evolution of money and payments in the country. CBDC will accelerate our digitization journey and advance financial inclusion.”
114 countries are exploring the possibilities of CBDCs
As the UAE tries to push the boundaries of CBDC use cases, debates over the viability of the asset in the US continue.
On March 21, Senator Ted Cruz introduced a bill to block the US Federal Reserve from issuing a “direct-to-consumer” CBDC. This bill was created out of fear that it would become an espionage tool.
Meanwhile, an investigation was also released by a department of the US Treasury. It claimed that integrating a CBDC into the economy would destabilize banks. It also calls the damage it could do to the banking system “significant” in times of stress.
Nigeria, on the other hand, is witnessing increasing adoption of its eNaira, while paper money is facing serious shortages. The total number of CBDC wallets in Nigeria stands at 13 million, more than 12 times as of October 2022.
As of March, 114 countries, representing more than 95% of global GDP, are examining CBDCs. According to the US-based think tank Atlantic Council, 65 countries are already at an advanced stage.