The Central Bank of the United Arab Emirates (CBUAE) is preparing to implement the first phase of the central bank's digital currency (CBDC) strategy. It is considering CBDC for both retail and wholesale use.
CBUAE inaugurated the new strategy on March 23 with a signing event with R3 and G42 Cloud, part of the Emirates-based AI holding company G42. R3 will provide the infrastructure for the digital dirham, while G42 Cloud will provide the technology.
The first phase of the strategy will have three components. It envisions a soft or limited launch of Project mBridge. The second will be to verify the concept of a bilateral CBDC bridge with India, one of the UAE's major trading partners. The third will be to verify the concept of a domestic CBDC for wholesale and retail use. According to a CBUAE statement:
"The CBDC will help address domestic and cross-border payment issues, increase financial inclusion and transition towards a cashless society."
The CBDC strategy is part of the larger CBUAE Financial Infrastructure Transformation Program.
CBUAE is one of the original participants in the mBridge project, which it describes as "the first cross-border CBDC pilot of real value." It also cited Project Aber undertaken jointly with the Saudi Central Bank as a successful initiative preceding the new strategy.
According to international professional services firm EY, the CBUAE is "encouraging all commercial banks and payment processors in the country to participate in the pilot integration with the CBUAE hub to issue digital dirhams; the regulator has also decided that all financial institutions (LFIs) licensed in the UAE will adopt the Digital Dirham by 2026."
The agreements with Abu Dhabi-based R3 and G42 were announced in March 2023 . At the time, the strategy was expected to take 12 to 15 months to implement.
In October, G42 entered into an agreement with OpenAI , which provides for cooperation in financial services, energy, healthcare and public services.
R3 is a major developer of CBDC technology. It is a blockchain provider with Corda approval. It has participated in numerous Bank for International Settlements projects and more.
