The Central Bank of the United Arab Emirates (CBUAE) has launched a digital currency implementation strategy that forms one of the major initiatives in its program to digitize the country’s financial sector.
In February, as part of the announcement of the Financial Infrastructure Transformation (FIT) programme, CBUAE said digital currency was one of a list of nine projects. This includes Instant Payment System, the country’s first card payment platform.
CBUAE has named financial services blockchain specialist R3 and UAE-headquartered cloud supplier G42 Cloud as infrastructure technology providers, with Clifford Chance providing legal services. central bank digital currency (CBDC) is a digital coin issued by a central bank and linked to a country’s legal tender. So unlike unstable cryptocurrencies, it always retains its value and replicates the use of cash.
CBUAE said CBDC will eventually be applied to various domestic and cross-border use cases in the Middle East region.
The first phase will take place over the next 12-15 months. According to CBUAE, this will allow the launch of real-value cross-border CBDC transactions for international trade settlement, proof-of-concept work on a bilateral CBDC bridge with India, and the concept of domestic CBDC issuance targeting wholesale and India. Demonstration work will begin. retail use.
“As part of CBUAE’s digital transformation programme, the implementation of the CBDC strategy aims to address cross-border payments pain points, enhance financial inclusion and further strengthen the UAE’s payments infrastructure.” said CBUAE.
“R3’s technical support will enable CBUAE to ensure the readiness of the UAE for the potential future tokenization of financial and non-financial activities, in addition to the digitization of other financial services.”
Payments made using CBDC will grow from $100 million this year to $200 billion in 2030. A staggering figure from Juniper research shows a 260,000% increase over the next seven years.
Juniper said the CBDC sector is in the early stages of development, mostly with pilot projects, but it hopes government projects will boost financial inclusion and stimulate adoption. This is true for emerging economies, where penetration rates are significantly higher than those of banks.
R3 CEO David Rutter said the plan is another milestone that will bring CBDC even closer to production and issuance. “CBDCs can enhance the infrastructure of financial markets in several ways, including making cross-border payments more efficient, shortening the settlement cycle, and streamlining multi-party processes. We have taken a big step.”
G42 Cloud CEO Talal Al Kaissi said the collaboration marks an important milestone in the digitization of the UAE’s currency and payment framework. “As a company founded in the United Arab Emirates, we have seen first-hand the rapid progress of the country’s status as a global fintech hub and we are looking forward to leading its digital transformation. We are excited to work with CBUAE.”
Meanwhile, Jack Hardman, Head of Middle East Fintech at Clifford Chance, said: In addition to how this new technology interacts with existing regulations. ”
