The United Arab Emirates (UAE) has been diligently advancing its central bank digital currency (CBDC) agenda over a significant period. Recent headlines suggesting newfound developments might be misleading, as the Central Bank of the UAE (CBUAE) has long been engaged in this endeavor. The CBUAE has already forged agreements with R3 Corda for its infrastructure and successfully conducted various pilots.
As early as November 2021, through the mBridge project, the UAE achieved a milestone by settling one billion AED in cross-border payments using the network, with the participation of two local commercial banks, FAB and Emirates NBD. In March 2023, the CBUAE and the Reserve Bank of India (RBI) signed a Memorandum of Understanding (MoU) in Abu Dhabi, outlining collaboration areas such as exploring CBDCs and establishing interoperability between the CBDCs of CBUAE and RBI.
Further solidifying its international ties, in October 2023, the CBUAE inked memoranda of understanding (MoU) with the Central Bank of China, focusing on digital currency cooperation. The collaboration between the People’s Bank of China (PBOC) and the Central Bank of the UAE, as well as agreements between the Bank of China (BoC) and the First Abu Dhabi Bank (FAB), laid the groundwork for testing cross-border payments.
These pilot projects and MoUs have allowed the UAE to test cross-border payments and lay the foundation for future full-scale operations. While recent developments may not be entirely new, clarity is anticipated with the signing of the CBDC law by the UAE central bank board.
In the domestic market, as previously reported on UNLOCK Blockchain, the central bank has collaborated with four local banks on various use cases, such as tourism dirham and CBDC for tax payments. The participation of four banks yielded promising results. Currently, discussions are underway with over 60 banks, as well as fintech firms and telcos, to ensure widespread understanding of the impending laws.
An intriguing aspect of this development is that the central bank board is set to sign both the CBDC law and the stablecoin law. Regarding stablecoins, the central bank previously released a consultation document, gathered stakeholder comments, and updated guidelines accordingly. The public release of both laws is expected no earlier than the end of May, following the first board meeting of the bank after the Ramadan vacation.
