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Get ready for a UAE CBDC as blockchain and crypto adoption accelerates

The UAE Central Bank (CBUAE) is set to introduce digital currency in a bid to join the US, China, Japan, and Germany to crack the top ten of central banks

Areas that it will focus on include AI and big data solutions in payments and insurance Dubai is now home to a new Bitcoin SV Hub which will foster development and innovation in blockchain 64% of adults would be likely to use a digital currency launched by their country’s Central Bank

The UAE Central Bank (CBUAE) is set to introduce digital currency in a bid to join the US, China, Japan, and Germany to crack the top ten of central banks.

The central bank digital currency (CBDC) launch is part of the central bank’s 2023-2026 strategy.

Alongside the issuance of digital currency, the central bank wants to promote digital transformation in the UAE’s financial services sector, increase financial inclusion through the use of digital IDs and use AI and machine learning to improve monitoring.

“Besides seeking to develop advanced and secure cloud infrastructure to operate financial and insurance services, the strategy aims to support the UAE’s green economy efforts and continue work to develop more innovative financial infrastructure to boost the UAE’s competitiveness in this field,” the CBUAE said in the statement to WAM.

In February, it was announced that the CBUAE was working with three other central banks from Thailand, Hong Kong, and China as well as the Bank of International Settlements, to collaborate on a digital currency project for cross-border payments called Project Inthanon-LionRock CBDC.

The CBUAE has identified seven areas that it will focus on and include artificial intelligence and big data solutions in payments and insurance. These will be connected to a digital ID (DID) infrastructure the country is building, enabling seamless interconnected payments. Known as the UAE PASS, the DID also allows citizens to access multiple government services quickly.  

The CBUAE announcement comes as news breaks of the European Central Bank approving the next stage of the Digital Euro.

Blockchain and crypto adoption, UAE

In 2018, the CBUAE worked with its counterpart in Saudi to develop blockchain projects including a dual-issued CBDC for cross-border payments.

A joint announcement with the Kingdom saw the countries launch a proof of concept project through the creation of a jointly-owned cryptocurrency, the Aber, which helped contribute to the body of knowledge surrounding Arabian CBDCs.

Further on blockchain adoption in the UAE, Dubai is now home to a new Bitcoin SV Hub which will foster development and innovation in the blockchain sector in the Middle East.

The Dubai Department of Finance (DoF) created a blockchain-powered Payment Reconciliation and Settlement platform in partnership with the Smart Dubai Office (SDO).

The platform is now used for quick and efficient transactions across the Dubai government office whereas in the past, traditional central bank transactions could take up to 45 days to process.

In November last year, the UAE Securities and Commodities Authority (SCA) established a national framework for cryptocurrency regulations following consultations with the crypto industry and the general public.

The regulations include a licensing regime aimed at facilitating fintech companies to work in the crypto space, providing regulatory coverage for ICOs, exchanges, and crypto traders.

Global CBDC adoption

Consumers worldwide are increasingly receptive to the launch of digital currencies by central banks and governments, new research from leading European deep tech company Guardtime shows.

The study across 10 countries including major European and Asian economies, the US, and UAE found 64% of adults would be likely to use a digital currency launched by their country’s central bank and government with 33% saying they would be very likely to use one.

Just 10% of those questioned said they would never use a CBDC and the study found strong support for converting savings into CBDCs and having salaries paid in digital currency.

Around one in three adults (33%) would be willing to convert their savings into a CBDC within a month and another 26% would do so within 1 to 6 months. Just 11% say they would never convert savings into a CBDC.

Up to 30% would be happy to have their salary paid in a CBDC within 1 month with another 27% following within 1 to 6 months. Around 12% would never accept being paid in a CBDC.