The United Arab Emirates Central Bank (UAECB) has signed an agreement with Abu Dhabi's G42 Cloud and digital finance services provider R3 for the implementation of its central bank digital currency (CBDC), Digital Dirham.
The move is part of the Financial Infrastructure Transformation program launched in February and will address domestic and cross-border payments, enhance financial inclusion, and move the country towards a cashless society.
The strategy, which aims to provide additional channels and strengthen the UAE's payment infrastructure, will help position the UAE as a leading global financial hub, according to Khaled Balama, Governor of the UAE Central Bank. The CBDC will promote financial inclusion and accelerate the digitalization journey in the country.
CBDCs are increasingly being developed by central banks globally as cryptocurrencies continue to gain popularity as an asset class among retail and institutional investors.
Currently, 65 countries are in advanced stages of CBDC development, with more than 20 central banks having already launched their pilot programs, according to the Atlantic Council.
Aside from boosting the competitiveness of the UAE as a "central FinTech hub," the CBDC will address issues such as ensuring maximum inclusion of the population in the banking system and reducing fraud and money laundering.
The UAECB's strategy also aims to ensure the readiness of the UAE to integrate the payment infrastructures with the future potential tokenization world.