Launch of “Digital Dirham” CBDC strategy by UAE Central Bank
The central bank of the United Arab Emirates (UAE) recently unveiled a new strategy, following the announcement of its plans in February, that would provide the infrastructure and technology for the issuance of its central bank digital currency (CBDC), known as “digital dirham.”
According to a press release from the central bank released on March 23, one of the nine key initiatives in the nation’s Financial Infrastructure Transformation (FIT) Program is the deployment of a digital version of the dirham under the “The Digital Dirham” strategy.
According to the announcement, the first phase of this strategy will take place over the next 12 to 15 months and will consist of three main pillars: a proof-of-concept (PoC) for CBDC bridges with India, a PoC for domestic CBDCs in wholesale and retail, and the soft launch of mBridge for real-value cross-border CBDC transactions in international trade settlements.
The Governor of the CBUAE, Khaled Mohamed Balama, commented on the most recent development and said:
“CBDC is one of the initiatives as part of the CBUAE’s FIT program, which will further position and solidify the UAE as a leading global financial hub. (…) The launch of our CBDC strategy marks a key step in the evolution of money and payments in the country.”
Recall that the Reserve Bank of India (RBI) and the UAE’s central bank signed a Memorandum of Understanding (MoU) in mid-March that stated that the two central banks would work together to conduct a PoC and pilots of a bilateral CBDC bridge to ease cross-border CBDC transactions of remittances and trade.
The introduction of CBDCs into the country’s operations has been the subject of a contentious political debate elsewhere in the United States. Congressman Tom Emmer has expressed his concerns, fearing that it could be “easily weaponized” into a surveillance tool for spying on American citizens, while Bank of America (NYSE: BAC) believes that CBDCs could revolutionize money.
Emmer introduced the CBDC Anti-Surveillance Act in February in an effort to stop the Federal Reserve from launching the Digital Dollar Project and safeguard the financial privacy of American citizens. Emmer claimed that any digital version of the dollar would have to “uphold American values of privacy, individual sovereignty, and free market competitiveness.”
The European Central Bank (ECB) is also developing its digital euro enrollment, which it stated should prioritize person-to-person payments and e-commerce, with the remaining use cases to come in the CBDC’s second phase of development.
The Bank for International Settlements (BIS), in collaboration with the central banks of Israel, Sweden, and Norway, has completed the “Icebreaker” project, which examines the potential benefits and difficulties of using CBDCs in international payments, according to Finbold.