The Central Bank of the United Arab Emirates (CBUAE) is about to fully launch its central bank digital currency (CBDC) the digital dirham for domestic and cross-border payments.
According to a March 23 announcement, the CBUAE signed an agreement with Abu Dhabi-based G42 Cloud and digital financial services provider R3 to become the infrastructure and technology provider for the implementation of the CBDC. In addition to addressing the challenges of domestic and cross-border payments, the central bank said it would also help promote financial inclusion as the country seeks to become a "cashless society".
The first phase of the CBDC strategy includes the soft launch of “mBridge”, a CBDC transaction to facilitate international trade, as well as proof-of-concept work on a bilateral CBDC bridge with India, and domestic CBDC issuance for wholesale and retail use. This phase is expected to be completed within the next 12 to 15 months, the announcement said. When the strategy was first announced on February 12, CBUAE Governor Khaled Mohamed Balama said: “The launch of our CBDC strategy marks a critical step in the country’s currency and payments development. A CBDC will accelerate our digitization and boost financial inclusion.”
While the UAE hopes to push the boundaries of CBDC use cases, debate continues over the asset’s viability in the United States. On March 21, Republican Senator Ted Cruz introduced a bill that would prevent the Federal Reserve from issuing a "direct-to-consumer" CBDC over concerns it could be used as a tool for espionage.
Meanwhile, a study released by a unit of the U.S. Treasury said integrating a CBDC into the economy would be destabilizing for banks, saying it could cause “significant” harm to the banking sector during times of stress.
Nigeria, on the other hand, is witnessing increasing adoption of its eNaira as it faces a severe shortage of banknotes. The total number of CBDC wallets in Nigeria is 13 million, an increase of more than 12 times compared to October 2022. As of March, 114 countries accounting for more than 95% of global GDP are exploring CBDCs. According to the Atlantic Council, a U.S. think tank, 65 countries are already in the advanced stage.
