After announcing its plans in February, the central bank of the United Arab Emirates (UAE) has recently launched a new strategy that would provide the infrastructure and technology for the issuance of its central bank digital currency (CBDC) called ‘digital dirham.’
Namely, the deployment of a digital version of the dirham, under ‘The Digital Dirham’ strategy, is part of the nine key initiatives in the country’s Financial Infrastructure Transformation (FIT) Program, according to the central bank’s press release published on March 23.
As per the announcement, the first phase of this strategy is set to take place over the following 12 to 15 months and includes three major pillars – the soft launch of mBridge for real-value cross-border CBDC transactions in international trade settlements; proof-of-concept (PoC) for CBDC bridges with India; and PoC for domestic CBDCs in wholesale and retail.
Commenting on the recent development, Khaled Mohamed Balama, the Governor of the CBUAE, 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.”
As a reminder, the UAE’s central bank announced its FIT program in February, and in mid-March, it signed a Memorandum of Understanding (MoU) with the Reserve Bank of India (RBI), which stated that the central banks would jointly conduct a PoC and pilots of a bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade.
CBDCs around the world
Elsewhere, CBDCs have been the topic of a hot political debate in the United States, with Congressman Tom Emmer expressing concerns over their introduction in the country’s operations, fearing it could be “easily weaponized” into a surveillance tool for spying on American citizens, whereas the Bank of America (NYSE: BAC) says CBDCs could revolutionize money.
Seeking to block the Federal Reserve from launching the Digital Dollar Project and protect the U.S. citizens’ financial privacy, Emmer introduced the CBDC Anti-Surveillance Act in February, arguing that any digital version of the dollar would need to “uphold American values of privacy, individual sovereignty, and free market competitiveness.”
At the same time, the European Central Bank (ECB) is working on its digital euro enrollment, which it declared should prioritize e-commerce and person-to-person payments, with remaining use cases to follow in the second phase of its CBDC development.
Meanwhile, the Bank for International Settlements (BIS) has finalized the project ‘Icebreaker’ that explores the potential advantages and challenges of using CBDCs in international payments in partnership with the central banks of Israel, Sweden, and Norway, as Finbold reported.