The UAE’s Financial Transformation Agenda: Digital Dirham & Beyond

An increasing number of jurisdictions across the globe are beginning to recognize the potential of Central Bank Digital Currencies. In recent years, we have seen countries like Sweden, Nigeria, the UK, and the Bahamas, to name a few, roll out their CBDC initiatives. And, based on the latest news, the UAE is ready to join this list, with the first phase of its Digital Dirham project going live in mid-2024.

In this overview, we explain everything you need to know about the UAE’s CBDC release, from its timeline and future prospects to its key partnerships and linked initiatives.

An Overview of the Digital Dirham Project: What’s It All About?

Based on the project outline, the Digital Dirham will be designed to address challenges in both domestic and cross-border payments, promote financial inclusion, and facilitate the country’s transition to a cashless society. It is also set to enhance the local payment infrastructure by introducing robust payment channels that are reliable and resilient.

H.E. Khaled Mohamed Balama, the Governor of the CBUAE, stated that the establishment of the UAE’s CBDC strategy is a game-changing step in the evolution of money and payments in the country. He also shared his excitement about tapping into the innovative opportunities that this initiative brings to the wider economy and society.

A Breakdown of the Initiative’s Timeline

As you can imagine, the implementation of such an important and large-scale project requires multiple steps. While there is currently no information regarding Digital Dirham’s long-term development plans, it has already been announced that its first phase will consist of three major pillars, namely:

• Proof-of-concept work for domestic CBDC issuance that covers both wholesale and retail use
• Soft launch of mBridge to facilitate cross-border CBDC transactions for international trade transactions
• Proof-of-concept work for bilateral CBDC bridges with India

As you can see, while the local use of the Digital Dirham is undoubtedly a priority, the CBUAE also has a strong focus on its interoperability with other countries’ digital payment systems. This progressive approach is also in line with the CBUAE’s grand plans of completely transforming the UAE’s financial infrastructure - learn more about it below.

The Bigger Picture: The CBUAE’s Financial Infrastructure Transformation Program

Thus, the Digital Dirham CBDC is only one part of a bigger puzzle, with other FIT lines of work including the following:

• Domestic card scheme
• Electronic Know Your Customer (eKYC) platform
• Open finance solutions
• Financial cloud system
• Supervisory Technology (SupTech)
• Innovation hub resource
• Real-Time Gross Settlement System (RTGS)
• Excellence and customer experience advancements

All of these initiatives will be conducted at their own pace, yet the full integration deadline is set for 2026.

What Does the Future of the UAE’s Payments Landscape Look Like?

Overall, it is clear to see that the UAE’s payment scene as we know it is going to be completely reinvented in no time, just as Dubai transformed from a desert landscape to a global metropolis in a remarkably short span.

While the specifics of all FIT-related projects are yet to be announced, the CBUAE’s focus on digitalization, interoperability, security, and user experience is setting up an incredibly strong foundation for any and all strategic moves that are to follow.