UAE’s ‘digital dirham’ CBDC pilot completes first transaction
2 min read
The United Arab Emirates has made the first transaction with its central bank digital currency in the first major update to the project since it was announced in March.
The United Arab Emirates’ Ministry of Finance and Dubai Finance
Test transaction took under two minutes
Dubai Finance’s executive director of central accounts, Ahmed Ali Meftah, said the transaction was conducted to “test operational readiness and ensure seamless technical integration with the Central Bank’s systems.”
“The transaction was completed in less than two minutes, underscoring its goal of enhancing operational efficiency and expediting financial settlements between federal and local government entities.”
Rollout will be in phases
In a policy paper released in July, the UAE Central Bank said the CBDC is an attempt to future-proof central bank money for the digital era, and in response to the evolving needs of a digital economy.
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It also indicated that the rollout would be in phases, with the CBDCs features at launch limited to payments only, to avoid competing with savings and other interest-earning financial products.
CBDCs are a hotly debated issue, with critics concerned that they could infringe on privacy and undermine the financial sector by allowing users to be direct customers of central banks, while advocates argue that CBDCs could improve payment efficiency and expand financial inclusion.
Only three successfully launched CBDCs so far
Many governments have been experimenting with CBDCs. In October, Kyrgyzstan confirmed it plans to issue a central bank digital currency, while the European Central Bank decided to move to the next phase of its digital euro project.
However, only three CBDCs have officially launched, according to the American think tank, the Atlantic Council.
Its CBDC tracker lists Nigeria, the Bahamas and Jamaica as the only three jurisdictions with an active CBDC token, while another 49 countries are in the pilot phase.
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