In preparation for the launch of the UAE’s national digital currency and in support of the country’s broader digital transformation efforts, the Central Bank of the UAE (CBUAE) has released a detailed report on the Digital Dirham project.

The publication provides a comprehensive overview of the progress made to date, alongside ongoing research and development activities as the CBUAE moves closer to the formal introduction of a central bank digital currency (CBDC).

The report outlines the design principles and policy frameworks underpinning the Digital Dirham, developed to ensure the currency is secure, reliable and user-friendly.

These principles align with international standards set by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS).

It also reflects the CBUAE’s collaboration with the financial sector and other strategic partners to facilitate the smooth adoption of the Digital Dirham.

Among the key features highlighted are the Digital Dirham’s role in enhancing innovation and financial inclusion.

The currency is intended to provide access to financial services for the unbanked and non-residents in the UAE, while improving transaction speed and payment system efficiency.

Functionalities such as offline use, smart contracts and cross-border payments are included as part of the project’s scope.

The Digital Dirham is designed to serve as a digital alternative to cash, supporting a wide range of transactions, including online, in-person, commercial and peer-to-peer payments.

In addition, the CBUAE has developed a supporting platform for issuing, trading and using the Digital Dirham.

This includes a digital wallet enabling individuals and businesses to carry out financial transactions securely and efficiently.

Commenting on the development, Khaled Mohamed Balama, Governor of the CBUAE, said:

“The Digital Dirham will help ensure a secure and efficient financial infrastructure for the UAE, enhance the efficiency of our payment ecosystem, support monetary stability, expand financial inclusion, and strengthen the international standing of the UAE Dirham.” He added: “We will continue to rigorously assess the design and development of the Digital Dirham to ensure its successful rollout and transformational impact through a consistent and prudent approach.”

The introduction of the Digital Dirham forms part of the CBUAE’s Financial Infrastructure Transformation (FIT) programme, launched in 2023.

This initiative is intended to respond to the changing demands of the digital economy while maintaining public trust in the national currency.

As part of its efforts, the CBUAE has already initiated a cross-border pilot and conducted a real-value retail trial to evaluate the design, technological foundations, and potential applications of the Digital Dirham.

Featured image credit: Edited by Fintech News Middle East, based on image by Freepik