Landmark Digital Dirham payment to China marks CBUAE’s 50th anniversary

Image credit: WAM

The UAE marked its first cross-border Central Bank Digital Currency (CBDC) transfer, named ‘Digital Dirham’, amounting to Dhs50m ($13.6m) to China on the occassion of its central bank’s 50th anniversary.

Sheikh Mansour bin Zayed Al Nahyan, Vice President, Deputy Prime Minister, Chairman of the Presidential Court, and Chairman of the Board of the Central Bank of the UAE (CBUAE), participated in the ceremony to commemorate the CBUAE’s 50th anniversary as well as initiate the CBDC transfer.

Digital Dirham powered by blockchain

Facilitated through the multi-CBDC platform ‘mBridge’, the transaction utilised central bank-mandated digital currencies for international fund transfers among participating banks, leveraging distributed ledger technology (DLT), commonly known as “blockchain.”

Explaining the significance of CBDC, the UAE’s Central Bank highlighted that it is a secure, cost-effective, and efficient form of digital money guaranteed by central banks.

As part of the UAE’s ongoing digital transformation, CBDC aims to overcome obstacles in domestic and cross-border payments, boost financial inclusion, and contribute to the nation’s progression towards a cashless society. Moreover, it is expected to fortify the UAE’s payment infrastructure, providing robust payment channels for a resilient and reliable financial system.

The CBUAE partnered with G42 Cloud and R3 to launch its CBDC strategy, one of the nine initiatives of the central bank’s Financial Infrastructure Transformation (FIT) Programme.

The first phase of the initiative comprises three major pillars; the soft launch of mBridge to facilitate real-value cross-border CBDC transactions for international trade settlement, proof-of-concept work for bilateral CBDC bridges with India and finally proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage.

mBridge

The pioneering project, mBridge, was introduced in 2021 by the central monetary authorities of China, Hong Kong, Thailand, and the UAE, in collaboration with the Bank for International Settlement (BIS). Notably, this initiative stands as the exclusive international collaborative partnership involving China. The project successfully concluded its first pilot in September 2022.

The mBridge platform has successfully onboarded multiple commercial banks from each participating nation, actively contributing to the development of the necessary infrastructure and technology.

CBDC adoption across the world

In the global landscape, 110 countries are currently researching or developing CBDCs, each at various stages of the regulation and development process. As of June 2023, 11 countries had adopted CBDCs, with an additional 53 in advanced planning stages and 46 actively researching the topic, according to e-research platform Statista.

Prominent economies, including China, Russia, South Africa, Uruguay, Barbados, Switzerland, and Thailand, are at the forefront of implementing CBDCs, showcasing the widespread embrace of this transformative financial technology.