The UAE Central Bank (CBUAE) is getting ready to introduce its Central Bank Digital Currency (CBDC), the “Digital Dirham,” by late 2025. The digital currency is intended to be a new, secure digital alternative to the UAE national currency. The Digital Dirham will be used for wholesale and retail financial purposes, allowing instant payment settlement with the trust and stability of old money underwritten by the UAE central bank.
What is a Central Bank Digital Currency (CBDC)?
A CBDC is a central bank-issued and backed digital money. In contrast to private company-produced cryptocurrencies, a CBDC is a sovereign currency and legal tender under the law. A CBDC is a digital equivalent of cash that is safe to use, economical, and efficient in transferring payments and holding value. A CBDC will supplement existing forms of money, such as cash and bank deposits, while maintaining monetary stability.
UAE’s Digital Dirham: Major Features and Objectives
The Digital Dirham is one of the UAE’s overall Financial Infrastructure Transformation (FIT) program, launched in 2023 to remake the financial system for a digital economy. It brings meaningful benefits, including improving payment system efficiency, raising access to financial services, and facilitating monetary policy effectiveness. The currency will enable retail, wholesale, and cross-border payments, fostering innovation and financial inclusion.
The Digital Dirham will be completely convertible into other types of Dirham-denominated currency to provide it with equal value. The CBUAE is also in the process of making cross-border usage of the Digital Dirham possible, with pilot transactions currently in place with India and other nations. This will enhance the efficiency and cost of global payments.
Why is the UAE Issuing a Digital Currency Now?
The UAE wants to keep up with the dynamic digital financial innovations and evolving economic needs. Introduction of the Digital Dirham will reduce the cost of making payments, increase the security and convenience of conducting business transactions, and drive the country towards a less cash-based economy. It reinvents the UAE as an international financial hub by offering advanced payment solutions that enable the rising trends in trade and investment activities.
Timeline of Progress and Launch
Pilot initiatives for the Digital Dirham got underway in early 2024, such as cross-border payment trials and retail transaction pilots. The central bank’s Digital Dirham issue platform is approximately 85% developed as of early 2025, with a complete launch being planned in the fourth quarter of 2025. The launch will have the Digital Dirham available to individuals, businesses, banks, and fintech developers.
What the Digital Dirham Means for Users
The Digital Dirham will serve for various payments, including online purchases, retail purchases, and person-to-person transfers. It will provide offline functionality and smart contract support. In making a secure and dependable digital currency available, the UAE aims to drive innovation in financial technology and enhance day-to-day access to monetary services, benefiting particularly the unbanked segment.
With this action, the UAE is one of the top nations to implement CBDCs to ensure financial systems are future-proof and ready to enter the digital economy of tomorrow.
