UAE to launch Digital Dirham by year-end to modernise payments and noost financial inclusion

The United Arab Emirates is set to join the ranks of countries rolling out central bank digital currencies (CBDCs), with its Digital Dirham scheduled for launch between October and December this year. The Central Bank of the UAE (CBUAE) confirmed the timeline on Thursday, framing the CBDC as a cornerstone of the country’s broader ambition to build a more secure, cost-efficient, and transparent financial ecosystem.

The CBUAE has also introduced a dedicated wallet to manage the Digital Dirham and unveiled a new symbol that will be used for both digital and fiat versions of the currency. According to the central bank, individuals and businesses will be able to access the CBDC via licensed institutions including banks, fintech firms, finance companies, and exchange houses.

CBDCs are blockchain-based versions of sovereign currencies, backed and issued by central banks. Unlike cryptocurrencies, which are decentralised and volatile, CBDCs offer the benefits of digital money, such as speed and traceability, while retaining the stability of traditional fiat. Every CBDC transaction is recorded on a blockchain, making it traceable and reducing dependency on cash.

In the UAE’s case, the Digital Dirham is also expected to play a key role in tackling financial crime. According to the CBUAE, encrypted records on blockchain networks will assist law enforcement by leaving a digital trail for transactions involving illicit funds.

The CBDC is a central component of the UAE’s Financial Infrastructure Transformation (FIT) programme, launched in 2023. Through initiatives such as tokenisation and smart contracts, the country aims to future-proof its financial sector.

Smart contracts, self-executing code that automates agreements, will be used to facilitate complex, multi-stage transactions with the Digital Dirham. Additionally, the tokenised nature of the currency will enable asset fractionalisation, expanding liquidity access to a wider group of market participants.

Digital Dirham users will be able to carry out domestic, wholesale, and cross-border payments via the government’s soon-to-launch wallet system, the bank said.

The UAE joins a growing list of countries accelerating efforts to digitise their monetary systems. India is currently conducting extensive trials of the eRupee, while South Korea has also indicated plans to test its CBDC in real-world scenarios. Meanwhile, China, Brazil, Iran, and Hong Kong continue to refine their own digital currencies.

The International Monetary Fund (IMF) recently introduced a framework called REDI to help central banks design and adopt CBDCs effectively. The fund stressed the need for public awareness and education around CBDCs to ensure smooth integration into existing systems.