- The CBUAE has engaged with two companies, G42 Cloud and R3, to support the implementation of a Central Bank Digital Currency
- The first pillar is the soft launch of Bridge, a platform that facilitates real-value cross-border Central Bank Digital Currency transactions
- The second pillar of the strategy is the proof-of-concept work for bilateral Central Bank Digital Currency bridges with India
The Central Bank of the United Arab Emirates (CBUAE) launched its Central Bank Digital Currency (CBDC) Strategy on Thursday as part of its Financial Infrastructure Transformation (FIT) Programme. The strategy includes nine initiatives. The FIT Programme aims to enhance the UAE’s financial infrastructure by introducing innovative and efficient technologies that support the UAE’s digital transformation. The strategy will create the CBDC payments infrastructure.
CBUAE’s Central Bank Digital Currency
The central bank issues and guarantees the Central Bank Digital Currency, which is a digital form of money. People can use it for domestic and cross-border transactions because it is a secure and cost-effective form of payment. Additionally, individuals and businesses can hold CBDC as a store of value, as an alternative to physical cash or bank deposits.
The CBUAE has engaged with two companies, G42 Cloud and R3, to support the implementation of the CBDC. G42 Cloud will provide the infrastructure needed to support the CBDC, while R3 will provide the technology needed to develop and manage the CBDC system.
The CBDC is expected to address the challenges related to domestic and cross-border payments, enhance financial inclusion, and support the move towards a cashless society. The CBDC will enable individuals and businesses to make payments quickly, securely, and cost-effectively, without the need for intermediaries such as banks or payment processors.
In addition, the CBDC will promote financial inclusion by providing access to financial services to individuals and businesses that are currently underserved by traditional financial institutions. This will help to reduce the financial exclusion gap in the UAE and contribute to the UAE’s efforts to build a more inclusive and sustainable economy.
UAE CBDC strategy
The CBUAE’s Central Bank Digital Currency Strategy consists of three major pillars. The first pillar is the soft launch of mBridge. A platform that facilitates real-value cross-border CBDC transactions for international trade settlement. The mBridge platform will enable businesses to conduct cross-border transactions quickly and efficiently. Thus reducing the time and cost involved in international trade.
The second pillar of the strategy is the proof-of-concept work for bilateral Central Bank Digital Currency bridges with India. This will involve developing a system that enables the exchange of CBDCs between the UAE and India. The bilateral CBDC bridges will facilitate cross-border transactions between the two countries and promote trade and investment.
The third pillar of the strategy is the proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage. This will involve developing a system that enables the issuance of CBDCs for domestic transactions. Both wholesale and retail transactions will use domestic CBDCs to promote the adoption of digital payments in the UAE.
Wholistic CBDC approach
What is impressive about the UAE’s Central Bank Digital Currency strategy is the approach. A lot of thought has clearly been put into the rollout. Nigeria launched Africa’s only active CBDC over a year ago and it hasn’t faired well in terms of adoption. Ghana has taken a more cautious approach while South Africa has chosen the role of a fast follower. The desire to connect to India is also notable as the CBDC project will touch two important world centres.
The launch of the CBDC Strategy is an important step in the evolution of money and payments in the UAE. It will contribute to the UAE’s digital transformation by enhancing the payment infrastructure, promoting financial inclusion, and supporting the move towards a cashless society. The CBUAE aims to strengthen the payment infrastructure in the UAE. The Central Bank also seeks to provide robust payment channels. Ensuring the readiness of the UAE to integrate payment infrastructures with the potential tokenization world.