UAE to Launch Digital Dirham CBDC in Q4 2025
The Central Bank of the United Arab Emirates (CBUAE) has announced plans to deploy a digital dirham, or central bank digital currency (CBDC), in Q4 2025. The retail version of the CBDC will be made legal tender, assuring mandatory acceptance for transactions across the country. In addition, the central bank intends to deploy the digital dirham for wholesale transactions and cross-border payments, demonstrating the UAE’s commitment to financial innovation.
As part of this plan, a digital dirham wallet will be established to allow for smooth transactions. While many global economies, particularly in Europe, are focusing on CBDCs for daily transactions, the UAE’s primary goal is to employ blockchain technology for financial applications.
The blockchain-based CBDC will be delivered via a network of banks, financial exchanges, fintech firms, and financial institutions. The UAE Central Bank plans to employ tokenization to permit partial ownership, hence increasing financial inclusion. Furthermore, smart contract integration will enable the automation of complex transactions as well as the support for atomic solutions, resulting in increased financial efficiency.
UAE’s Leadership in Blockchain and Crypto Adoption
The UAE has emerged as a global leader in blockchain and cryptocurrency adoption, with the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) establishing a robust regulatory framework for digital assets. The government’s forward-looking stance is demonstrated by investments such as the government-linked MGX’s interest in Binance, one of the world’s leading cryptocurrency exchanges.
The Governor of the CBUAE, His Excellency Khalid Mohammed Balama, stressed the potential of the digital dirham to promote financial stability, inclusion, resilience and combat financial crime through its blockchain platform.
He said that the implementation of the CBDC would encourage innovation, which would result in the creation of new digital financial products, services and business models. The project is expected to reduce costs and provide access to international markets, in line with the UAE’s goal of becoming a global financial hub.
UAE’s Ongoing CBDC Collaborations and Past Projects
The UAE has been actively pursuing CBDC technology through strategic partnerships and pioneering initiatives. In 2022, the central bank partnered with blockchain company R3 to create the digital dirham. The UAE initially adopted mBridge, a cross-border CBDC platform developed in partnership with China, Hong Kong, Thailand, and the Bank for International Settlements. However, in 2023, the BIS withdrew from the project.
To strengthen trade links between the two countries, the UAE has been testing cross-border CBDC transactions with India. One of its early CBDC trials was Project Abar, a joint digital currency initiative with Saudi Arabia, in which the two governments explored the use of a common digital currency for cross-border transactions.
With the digital dirham set to launch in late 2025, the UAE is positioning itself at the forefront of the global digital currency revolution, embracing blockchain technology to drive financial transformation and enhance economic resilience in an increasingly digitalized world.