UAE’s Central Bank pushes for CBDC for financial transformation

The UAE is looking to boost its cross-border payments while also enhancing its domestic financial infrastructure. This comes after the Central Bank of the UAE announced the issue of CBDC, short for central bank digital currency. The issuance of CBDC comes as a part of the financial infrastructure transformation program.

While the digital currency would push its payment facilities across borders and within the region, the program itself supports the financial services sector. The program and the issuance complement each other, as the pair would facilitate digital transactions to strengthen the UAE’s bid to become a digital payment hub.

There are a total of nine initiatives under the program. The first stage includes issuing digital currency and much more. This will be followed by the implementation of e-KYC and an innovation hub.

Circling back to CBDC, the central bank estimates that it needs to deal with the problems and inefficiencies of cross-border payments. Moreover, it would help drive innovation for players working in the domestic market. Khaled Mohamed Balama, the Governor of the UAE’s Central Bank, has expressed confidence in the program, saying that it will support the thriving financial ecosystem and its growth in the future.

Another initiative that could help the city’s bid to become a financial hub is the plan to launch a unified card payment platform. It is being drafted with eCommerce at its core and the mission to facilitate its growth, along with offering support for financial inclusion. Once drafted, the unified card payment platform will enable a cashless society during the first stage of the program.

The announcement about CBDC was made by the Central Government through a media note, wherein it mentioned all nine initiatives that will be implemented in the days to come. Apart from CBDC and eKYC, initiatives will cover Card Domestic Scheme, Open Finance, Supervisory Technology, Innovation Hub, Instant Payment Platform, Financial Cloud, and Excellence and Customer Experience.

This is not the first time the UAE has taken a step toward working for digital currency. VARA, the regulatory authority of the UAE for digital assets, recently published Full Market Product Regulations covering activities related to virtual assets. It also covers a ban on the issuance of privacy coins, often known as anonymity-enhanced cryptocurrencies. Some of the best crypto exchanges in UAE have shown a positive response.

For instance, Saqr Ereiqat has emphasized that privacy coins are different from cryptocurrencies as they mostly enable illicit activities, something that cryptocurrencies can get a hold of. The co-founder of Oasis issued this statement while interacting with the media.

CBDC could have effects in more than one sector. The Central Bank estimates that digital currency will work in favor of easing out cross-border payments and simplifying the payment infrastructure for domestic purposes. Since the Central Bank is involved, it is safe to assume that users will be assured of transaction safety.