Out-Law News 1 min. read
16 Feb 2023, 1:49 pm
The Central Bank of the UAE says the launch a new digital currency will help boost the country’s competitiveness as a financial and digital payment hub.
The digital dirham would be an electronic version of the cash issued by the Central Bank that could be used for both domestic and cross-border transactions, and would likely be accessed through digital wallets provided by private companies. The announcement comes as more than 100 countries around the world consider whether to develop their own digital currency.
Pilot testing for digital currency is currently taking place in Sweden, Russia, China, Ukraine, India, Canada and Turkey. To date, however, just a handful of nations have successfully established one, including Nigeria, the Bahamas and the seven states in the eastern Caribbean.
The UAE Central Bank said its pilot, known as Project Aber, would help build trust in money, and better protect the country’s financial system. The effort is one of the nine initiatives included in the UAE’s Financial Infrastructure Transformation (FIT) programme, which will introduce a card domestic scheme, an instant payments platform and a ‘financial cloud’.
In a statement (2 pages / 398KB PDF), the Central Bank also said it would establish an innovation hub, as well as open finance platforms, and adopt supervisory technology (SupTech) and electronic ‘Know Your Customer’ (eKYC) identity verification. Khaled Mohamed Balama, governor of the Central Bank of the UAE, said: “The FIT Programme embodies the directions and aspirations of our wise leadership towards digitising the economy and developing the financial sector.”
He added: “We are proud to be building an infrastructure that will support a thriving UAE financial ecosystem and its future growth. We will work with our partners to implement the programme, achieve its goals, accelerate the adoption of digital services in the financial sector and attract the best talent.” Further details about the implementation of each element of the FIT programme are expected at a later date.
Barkha Doshi of Pinsent Masons said the FIT programme would allow the UAE “to stay ahead of the curve” and become a centre of excellence for innovation and digital transformation. “By adopting advanced technologies and implementing robust supervisory processes, the program will improve regulatory compliance, cost of operation, and customer experience, all while strengthening security and resilience,” she added.