The Central Bank of the UAE has launched the implementation of the CBDC strategy – ‘The Digital Dirham’. A pivotal initiative of CBUAE’s Financial Infrastructure Transformation (FIT) Programme. Certainly, the right strategical move, as going digital addresses long standing pain-points in the Financial System, from both ends – the user and the currency issuer, the Government.
A lot was said about the motivators behind the switch, which are undeniable, for one the underlying blockchain technology already recognized as revolutionizing the financial industry, but also progressively transforming the delivery of Government services by offering stability, transparency, immutability. Financial inclusion for unbanked and underbanked populations, which still are significant % of the world population that needs consideration, increasing efficiency in payments and lowering transaction costs; creating programmable money, transparency and control on “house budget” and many more to be added in the course of use.
From legal and compliance standpoint the adoption of CBDC ‘The Digital Dirham’ is a strategic move holding massive potential in the tokenization of financial and non-financial activities, something UAE has been progressively working on, with total transparency in money flows for domestic and cross-border payments, supporting ease of the implementation of monetary policies. For other adopting governments, where the battle with grey economy, money laundry and illegal funding is ongoing with direct impact on taxation, the digital currency is undeniable solution.
What we must address are the operational risks that may arise from a complete shift to technology. Undoubtedly, improving resilience against cyber-attacks vulnerability, building complex regulatory framework to address privacy concerns and consumer protection.
Source: CBUAE launches the Central Bank Digital Currency Strategy “The Digital Dirham”