UAE's Central Bank Embarks on Phase One of CBDC Strategy, Boosting Digital Finance
Summary:
The United Arab Emirates' Central Bank (CBUAE) is set to roll out the initial phase of its central bank digital currency (CBDC) strategy. The strategy kicks off with cooperation from R3 and G42 Cloud, which will provide the infrastructure and technology respectively. The bank's CBDC plan also includes a proof-of-concept of a bilateral CBDC bridge with India, one of the UAE's top trading partners, and a domestic CBDC for both retail and wholesale use. This is part of the CBUAE's broader Financial Infrastructure Transformation Programme with the ultimate intention of boosting financial inclusion and facilitating a cashless society.
The United Arab Emirates' Central Bank (CBUAE) is organizing to roll out the initial stage of its strategy for a central bank digital currency (CBDC), designed for both consumer and wholesale usage. A contractual event with R3 and G42 Cloud, a part of UAE-based artificial intelligence holding firm G42, on March 23 launched this novel approach. R3 will be responsible for developing the digital dirham's infrastructure, while G42 Cloud will supply the technology.
The strategy's primary stage will consist of three distinct parts: a soft roll-out or restricted introduction of Project mBridge is first up, followed by a practical demonstration of a bilateral CBDC bridge with India, one of the UAE's primary trade allies. The final part will involve another practical proof for a domestic CBDC catering to wholesale and retail customers. The CBUAE communicated in an announcement that the CBDC will mitigate difficulties encountered in domestic and cross-border transactions, boost financial inclusion and facilitate the move towards a society less dependent on cash.
The CBDC initiative is a component of the CBUAE's broader Financial Infrastructure Transformation Programme. With its involvement in Project mBridge, described as the “first significant cross-border CBDC pilot,” the CBUAE was among the earliest participants. It also referenced Project Aber, a project undertaken in partnership with the Saudi Central Bank, as an accomplished operation paving the way for the current strategy.
According to global professional services firm EY, the CBUAE "is inviting all commercial banks and payment processors in the country to participate in a trial integration with the CBUAE node for issuing Digital Dirham. The central bank has also mandated full adoption of the Digital Dirham by all UAE certified financial institutions by 2026."
In March 2023, the agreements with R3 and G42, based in Abu Dhabi, were made public. Initially, it was anticipated that putting the strategy into effect would take between 12 to 15 months.
G42 established an agreement with OpenAI in October, fostering collaboration in healthcare, energy, public services, and financial services sectors. R3, a chief innovator of CBDC technology, supplies the Corda-approved blockchain, and has actively participated in numerous Bank for International Settlements ventures and others.
Published At
3/25/2024 7:13:39 PM
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