The Central Bank of the United Arab Emirates (CBUAE) is gearing up to roll out the initial phase of its central bank digital currency (CBDC) strategy. The CBUAE aims to introduce CBDC for both retail and wholesale purposes.
To kickstart this new strategy, the CBUAE held a signing event on March 23 with R3 and G42 Cloud, both subsidiaries of the AI holding company G42, headquartered in the Emirates. R3 will provide the necessary infrastructure for the digital dirham, while G42 Cloud will handle the technology aspect.
The first phase of the strategy comprises three key components. The first is the soft launch of Project mBridge, followed by a proof-of-concept for a bilateral CBDC bridge with India, one of the UAE’s primary trading partners. The third component involves a proof-of-concept for a domestic CBDC that can be used for both wholesale and retail purposes. The CBUAE stated:
“The CBDC strategy forms part of the CBUAE’s broader Financial Infrastructure Transformation Programme.”
The CBUAE is one of the original participants in Project mBridge, which is described as the “first real-value cross-border CBDC pilot.” It also mentioned the success of Project Aber, a previous initiative carried out in collaboration with the Saudi Central Bank, as a precursor to the new strategy.
According to global professional services firm EY, the CBUAE is actively encouraging all commercial banks and payments processors in the country to participate in a pilot integration with the CBUAE node for issuing the Digital Dirham. Moreover, the regulator has mandated that all UAE licensed financial institutions (LFI) adopt the Digital Dirham by 2026.
In March 2023, the agreements with R3 and Abu Dhabi-based G42 were announced. At that time, it was estimated that the implementation of the strategy would take between 12 to 15 months.
G42 had previously entered into a partnership with OpenAI in October, aiming to collaborate in various sectors such as financial services, energy, healthcare, and public services.
R3, a prominent CBDC technology developer, is known for its Corda permissioned blockchain. It has participated in various projects led by the Bank for International Settlements, among others.
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