The Central Bank of the United Arab Emirates (CBUAE) has announced its plan to launch a central bank digital currency (CBDC) as part of its movement toward digitalizing financial services.
CBDC is a digital currency issued by a country’s central bank. Its denominations are usually the same as that of the existing physical banknotes and coins. This implies that the value of a CBDC is redeemable for an equal amount in physical cash.
UAE Weighs Idea of a CBDC
UAE’s idea of a CBDC is part of nine initiatives to be accomplished by the CBUAE’s newly launched financial scheme, the Financial Infrastructure Transformation (FIT) program.
According to the statement, the digital asset will enable cross-border transactions and domestic usage. The agency believes this will help solve the limitations tied to current cross-border trades and “help drive innovation for domestic payments.”
When the UAE CBDC launches, seven emirates under the federation should have easy access to the asset. These emirates are Abu Dhabi (the capital), Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain.
Other initiatives outlined in the statement included e-Know-Your-Customer (eKYC), instant payments platform, financial cloud, and others.
CBUAE projects 2026 as the year of launch for the initiatives.
“We are proud to be building an infrastructure that will support a thriving UAE financial ecosystem and its future growth. We will work with our partners to implement the Programme, achieve its goals, accelerate the adoption of digital services in the financial sector and attract the best talent,” Khaled Mohamed Balama, the governor of CBUAE, said.
UAE’s latest move towards a CBDC launch puts it in line with several countries also working on a CBDC. Examples include the United Kingdom’s digital pound and the European Union’s digital euro. Countries like China, the Bahamas, Kazakhstan, and others have launched their CBDCs.
UAE’s History With Crypto
The UAE has shown itself to be a crypto-friendly region. Regulatory authorities have approved crypto exchanges, such as OKX, CryptoCom, ByBit, and Kraken, to offer crypto services to UAE citizens.
The country has also shown interest in other services, such as metaverse and non-fungible tokens (NFTs).
