The United Arab Emirates has conducted its first central bank digital currency transaction, marking a significant development in the project since its announcement in March.
The Ministry of Finance and Dubai Finance announced on Tuesday that the transaction was part of the pilot phase of the Digital Dirham project and utilized the government payment platform mBridge. This initiative represents a crucial step towards the broader adoption of the national digital currency across both government and private sector operations.
This event is the first major update regarding the CBDC since the UAE's central bank indicated in March that the digital currency was expected to begin its rollout in the fourth quarter of 2025.
Source: Maktoum bin Mohammed
Test Transaction Under Two Minutes
Ahmed Ali Meftah, executive director of central accounts at Dubai Finance, stated that the transaction was performed to evaluate operational readiness and ensure smooth technical integration with the Central Bank's systems.
The transaction was completed in less than two minutes, underscoring its goal of enhancing operational efficiency and expediting financial settlements between federal and local government entities.
Phased Rollout Planned
In a policy paper released in July, the UAE Central Bank outlined that the CBDC aims to future-proof central bank money for the digital age and address the evolving demands of a digital economy.
The paper also indicated that the rollout would occur in phases, with the initial features of the CBDC limited to payments only. This approach is designed to prevent competition with savings and other interest-bearing financial products.
Central bank digital currencies are a subject of considerable discussion. Critics express concerns that CBDCs could potentially compromise user privacy and disrupt the financial sector by enabling direct customer relationships with central banks. Conversely, advocates argue that CBDCs could improve payment efficiency and broaden financial inclusion.
Limited CBDC Launches Globally
Numerous governments are actively exploring CBDCs. In October, Kyrgyzstan confirmed its intentions to issue a central bank digital currency, while the European Central Bank decided to advance to the next stage of its digital euro project.
However, according to the American think tank, the Atlantic Council, only three CBDCs have been officially launched to date.
The Atlantic Council's CBDC tracker identifies Nigeria, the Bahamas, and Jamaica as the only jurisdictions with an active CBDC token. An additional 49 countries are currently in the pilot phase of their CBDC development.