The United Arab Emirates is closing in on the phased launch of its Digital Dirham central bank digital currency.
In the works for several years, the retail and wholesale Digital Dirham will improve the financial system's resilience, efficiency, innovation and inclusion, says the Central Bank of the UAE (CBUAE).
The CBUAE has already put in place the core infrastructure and can now issue, redeem and distribute the Digital Dirham to licensed financial institutions through a custom-built issuance platform utilising DLT.
The CBDC will soon be introduced in phases to mitigate risks, with an intermediated two-tier distribution model and wallet-based access. At launch, it will be non-interest bearing to encourage its use for payments, rather than as as substitute for savings, and will be fully fungible with cash and deposits.
Users will have wallets with account identifiers with all transactions recorded on the permissioned distributed ledger. DLT will ensure immutability and strong privacy safeguards through pseudonymity, while also enabling integration with existing payment systems and new digital asset networks, says the central bank.
The retail CBDC will support peer-to-peer, online and in-store payments, business-to-consumer, business-to-business, and government-to-consumer transactions, and other use cases enabled by programmability.
Meanwhile, the UAE is working with other markets, particularly in the Mena region, to facilitate cross-border payments and offshore holdings of the Digital Dirham. The CBUAU has already worked with other central banks as part of the BIS Innovation Hub's mBridge project, meaning that the Digital Dirham can be used for cross-border settlement and payment-versus-payment.
Khaled Mohamed Balama, governor, CBUAE, says: "The Digital Dirham will help ensure a secure and efficient financial infrastructure for the UAE, enhance the efficiency of our payment ecosystem, support monetary stability, expand financial inclusion, and strengthen the international standing of the UAE Dirham."