29/05/2025
UAE aiming to launch retail central bank digital currency this year
The Central Bank of the United Arab Emirates (CBUAE) has announced its intention to issue a retail central bank digital currency (CBDC) – a digital dirham – during the final quarter of 2025.
The digital dirham’s launch is among the main initiatives of the ‘Financial Infrastructure Transformation (FIT) Programme’, a multi-pronged fintech-related action plan launched by the CBUAE instigated just over two years ago to ‘accelerate the digital transformation’ of financial services (February 2023). Digital payment initiatives would, the central bank said, ‘drive financial inclusion, promote payment innovation, security and efficiency, and achieve a cashless society.’
The CBUAE announced in January this year that the FIT Programme, which spans nine initiatives overall, was ‘85 percent’ complete. The target date for what the authority has described as ‘full integration’ is 2026.
The timing of the blockchain-based retail CBDC’s planned launch is contained in a broader communication from the central bank (‘CBUAE Unveils New Dirham Symbol in conjunction with the UAE’s joining of the FX Global Code’) published on 27 March.
The announcement states that the CBDC will bring technological and security benefits; lists ‘several key advantages and characteristics’ that will drive broader fintech-related ‘development and innovation’; and summaries legislative changes required to ‘ensure the digital dirham’s acceptance as a universal payment instrument (legal tender) in all payment outlets and channels alongside physical currency’.
RETAIL CBDC:
EXPLAINED A retail CBDC is a CBDC for use by the general population. Another type of CBDC – a wholesale CBDC – is for interbank use.
CBDC ‘facilitates tokenisation’
The central bank’s communication leads on promoting a new symbol for the UAE’s national currency in both its physical and digital formats; as well as highlighting its recent signing of a ‘statement of commitment’ of the FX Global Code (a set of global principles of good practice in the foreign exchange market), becoming the first Arab region central bank to do so (as announced on 5 March).
It describes the digital dirham as a ‘digital version of the UAE’s national currency, characterised by high levels of security and efficiency, contributing to reduced costs of payments through its reliance on blockchain technology, which by its technical design insures effective risk management, data protection/privacy and atomic transaction completion.’
Individuals and businesses will be able to obtain the CBDC through licensed financial institutions, such as banks, exchange houses, finance companies and fintech companies, ‘according to the use cases that will be activated’, the announcement states, going to describe the planned issuance timing as ‘expected’.
The ‘several key advantages and characteristics’ include both tokenisation and smart contracts.
The digital dirham ‘facilitates tokenisation, enhancing financial inclusion and efficiency, and expanding access to liquidity through digital asset fractionalisation,’ the CBUAE states.
In respect of smart contracts, it states that the digital dirham is ‘used with smart contracts to programme the ex*****on of complex transactions automatically, settling them instantly, in addition to multi-stage and multi-party transactions that involve conditions or obligations.’
BLOCKCHAIN:
EXPLAINED is a distributed ledger (or database) that maintains a growing list of records (‘blocks’) linked using cryptography; most CBDCs are built using blockchain technology.
Digital Dirham wallet
The also highlights that it has developed an ‘integrated and secure’ platform for the issuance, circulation and use of the , including a ‘Digital Dirham wallet’.
The wallet is ‘designed for ease of use and management’ by individuals and businesses, ‘enabling a number of financial transactions, including retail, wholesale and cross-border payments, money transfers and withdrawals, top-ups and redemption of the Digital Dirham when needed’, the central bank states, adding that ‘this ensures a seamless and convenient user experience, in line with industry best standards and practices.’
‘The platform is also characterised by its ability to easily incorporate innovative financial solutions tailored to emerging use cases driven by the rapid growth of the digital economy in the UAE,’ the announcement continues. ‘This contributes to ensuring a flexible and advanced financial system, further solidifying the UAE’s competitive edge as a leading financial hub and global digital payments platform.’
The central bank’s governor H.E. Khaled Mohamed Balama described the new currency symbol and announcement of the design of CBDC wallet as “reflect[ing] the significant advancements in the implementation of the Digital Dirham programme and a leap towards realising the CBUAE’s vision.”
“It is anticipated that the Digital Dirham, as a blockchain-based platform with cutting-edge capabilities, shall substantially enhance financial stability, inclusion, resilience and combatting financial crime,” he added. “It will further enable the development of innovative digital products, services, and new business models, while reducing cost and increasing access to international markets.”
The CBUAE’s update on FIT in January highlighted numerous milestones as having been achieved, including the first cross-border payment using the digital dirham – with China via blockchain-based ledger ‘mBridge’.
The mBridge platform was developed through a collaboration (‘Project mBridge’) launched in 2021 between the Bank for International Settlements (BIS) Innovation Hub, Bank of Thailand, Digital Currency Institute of the People’s Bank of China and the Hong Kong Monetary Authority, as well as the CBUAE. The Saudi Central Bank joined last year and, separately, the BIS stepped back from its participation.
The first cross-border digital dirham payment was worth AED 50 million (just under £11m/$13.6m). The milestone moment took place in January 2024, a few months ahead of a BIS announcement (in June 2024) that the mBridge product had reached ‘minimum viable product’ (MVP) stage. An mBridge pilot involving 20 commercial banks undertaking real-value transactions was conducted in 2022.
The CBUAE has previously said that the digital dirham would be for both cross-border payments and domestic usage ‘in order to address the problems and inefficiency of cross-border payments and help drive innovation for domestic payments respectively.’
The cross-border component is logical, given that the majority of the UAE’s estimated population of just over 10 million people are expatriates, and the CBUAE’s significant volume of experimentation in the international CBDC arena. For example, the CBUAE has also run a wholesale CBDC proof-of-concept with the Saudi Central Bank to settle domestic and cross-border transactions using central bank money (’Project Aber’).
The FIT Programme is part of the country’s ‘We the UAE 2031’ vision (launched in November 2022) and also links to the ‘UAE Digital Economy Strategy’, which launched in April 2022 and aims to double the digital economy’s contribution to the UAE’s non-oil GDP within 10 years.