The United Arab Emirates (UAE) is preparing to launch its Digital Dirham CBDC (Central Bank Digital Currency) for retail transactions by the last quarter of 2025, marking a significant step toward digital currency adoption in the country.
Digital Dirham to be Accepted Across All Payment Channels
As first reported by the Khaleej Times, the Central Bank of the UAE (CBUAE) has confirmed plans to issue a digital version of the UAE dirham (AED) that will function alongside traditional cash. The Digital Dirham CBDC will be available through licensed financial institutions, including banks, exchange houses, and fintech firms.
The digital currency will feature:
- High-security encryption to prevent counterfeiting
- Tokenization technology for secure digital transactions
- Smart contract integration to enable instant settlements and multi-party transactions
Additionally, the CBUAE has developed an integrated Digital Dirham platform and wallet, supporting:
- Retail transactions (for individuals and businesses)
- Wholesale transactions (for financial institutions)
- Cross-border transactions (for international settlements)
UAE’s Growing CBDC and Stablecoin Ecosystem
The UAE’s move toward a sovereign-backed digital currency follows an extensive digital finance strategy. In June 2024, the UAE rolled out a stablecoin regulatory framework, setting licensing rules for dirham-backed stablecoins. This led to key developments, including Tether’s efforts to issue AED-backed tokens.
Unlike private stablecoins, the Digital Dirham CBDC will be:
- Fully regulated by the UAE’s central bank
- Backed by sovereign authority for added security
- Integrated into the UAE’s official monetary policy
Global CBDC Expansion and UAE’s Cross-Border Partnerships
The UAE is also exploring international CBDC collaborations. In Project Aber, a joint initiative with Saudi Arabia, the two nations have tested cross-border payments using digital currencies.
The UAE joins a growing list of nations actively testing CBDCs, including:
- China (Digital Yuan)
- Russia (Digital Ruble)
- Sweden (e-Krona)
- Brazil (Drex)
- United Kingdom (Digital Pound)
- European Central Bank (Digital Euro trials)
What’s Next for the Digital Dirham?
Currently, the CBUAE is in the testing and development phase for the Digital Dirham. Once launched, it is expected to enhance financial inclusion, streamline digital transactions, and strengthen the UAE’s position in global digital finance.
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