- UAE‘s Central Bank plans to launch retail Digital Dirham CBDC in Q4 2024 as legal tender.
- The blockchain-based CBDC will be distributed through financial institutions and feature smart contracts for transaction automation.
- UAE has established a supportive regulatory environment for blockchain and has collaborated internationally on cross-border CBDC initiatives.
The Central Bank of the UAE has announced plans to introduce its Digital Dirham central bank digital currency (CBDC) during the fourth quarter of 2024. The retail version will be classified as legal tender, mandating its acceptance as payment throughout the UAE. The central bank’s strategy extends beyond retail applications to include wholesale and cross-border payment functionalities.
Accompanying the CBDC launch, the central bank will release a Digital Dirham wallet. Unlike European CBDC initiatives that focus primarily on everyday consumer transactions, the UAE’s approach emphasizes broader financial applications and capabilities.
Distribution of the blockchain-based Digital Dirham will occur through various financial channels including banks, exchanges, finance companies, and fintech organizations. The central bank views asset fractionalization through tokenization as a mechanism for enhancing financial inclusion. Smart contract functionality will enable automated complex transactions and instantaneous settlement.
The UAE has actively embraced blockchain technology and cryptocurrency, with Dubai‘s DIFC and Abu Dhabi’s ADGM financial centers providing regulatory frameworks that support innovation. The country’s commitment to digital assets was further demonstrated when state-affiliated MGX recently invested in Binance, a major cryptocurrency exchange.
“It is anticipated that the Digital Dirham as a blockchain based platform with cutting edge capabilities shall substantially enhance financial stability, inclusion, resilience, and combatting financial crime,” stated H.E. Khaled Mohamed Balama, Governor of the Central Bank of the UAE.
The Governor added, “It will further enable the development of innovative digital products, services, and new business models, while reducing cost and increasing access to international markets.”
The central bank’s CBDC development journey began two years ago with a partnership with blockchain firm R3. Last year, it executed initial transactions on mBridge, a cross-border CBDC platform developed collaboratively by the central banks of the UAE, China, Hong Kong, and Thailand, along with the Bank for International Settlements (BIS), though the BIS subsequently withdrew from the project.
Prior to mBridge, the UAE conducted cross-border CBDC trials with India and participated in Project Aber with Saudi Arabia, focusing on wholesale CBDC applications. Both the UAE and Saudi Arabia maintain currencies pegged to the US dollar, creating a natural alignment for such collaboration.
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