UAE moves closer to its Crypto dreams, announces new CBDC strategy

UAE moves closer to its Crypto dreams, announces new CBDC strategy

The Central Bank of the UAE (CBUAE) stated on Thursday that the first phase of its central bank digital currency (CBDC) will be completed over the next 12 to 15 months. The proposal is expected to be completed by the middle of 2024. It will entail the establishment of bilateral connections with a country as well as the introduction of a proof-of-concept for CBDC issuance for both wholesale and retail.

CBUAE further disclosed that the CBDC strategy will be implemented in three phases, supporting the debut of the digital dirham. The first pillar is the soft launch of mBridge, a project co-created by the Bank for International Settlements (BIS) and the central banks of the United Arab Emirates, China, Hong Kong, and Thailand. Its goal is to make real-value cross-border CBDC transactions for international trade settlement easier.

The UAE central bank will create a proof-of-concept for bilateral CBDC bridges with India, one of the UAE’s key trading partners, for the second pillar. In addition, for the third pillar, the UAE regulator will create proof-of-concept work for domestic CBDC issuance that covers both wholesale and retail usage. Furthermore, the Abu Dhabi-based central bank announced an agreement with G42 Cloud, a regional cloud platform, and R3, a New York-based blockchain business, enrolling them as infrastructure and technology providers, respectively, for the CBDC deployment. 

The UAE launched its digital dirham as one of nine core objectives of its new Financial Infrastructure Transformation Program, at a time when central banks around the world are examining CBDCs.

the Governor of the CBUAE, Khaled Mohamed Balama said, “The launch of our CBDC strategy marks a key step in the evolution of money and payments in the country. CBDC will accelerate our digitalization journey and promote financial inclusion. We look forward to exploring the opportunities that CBDC will bring to the wider economy and society.”

The UAE’s overall crypto policies are highly advanced. They declared in February 2022 that they will grant federal licences to virtual asset service providers. (VASPs), Dubai developed a separate cryptocurrency regulatory agency and enforced crypto legislation, encouraging several large cryptocurrency businesses to set up shop there. They have previously shown interest in becoming a crypto market hub. They aspire to compete with heavyweights such as Hong Kong and Singapore. Ras Al Khaimah (RAK), one of the UAE’s emirates, is also developing the world’s first free economic zone entirely dedicated to virtual assets and digital businesses.