The government of the United Arab Emirates (UAE) has just reached a significant milestone in the national central bank digital currency (CBDC) project by successfully carrying out the first transaction using the Digital Dirham. This historic step is being carried out during the project's testing phase, demonstrating UAE's strong commitment to innovating its payment and financial systems.
This pilot transaction was completed through the mBridge platform, an important digital framework designed to facilitate cross-border transactions. The most impressive aspect is its speed and efficiency: the entire transaction process takes less than two minutes. This figure illustrates the enormous potential of CBDCs in significantly reducing processing times and costs associated with traditional payment methods, especially in international transactions.
The use of the mBridge platform in this first trial is not coincidental. It signals that the UAE is seeking not just a domestic payment solution but also a tool that can seamlessly integrate into a multi-currency and multi-national payment ecosystem. mBridge is considered one of the world's leading projects aimed at addressing the complex issues of cross-border payments using distributed ledger technology.
The success of the transaction #DigitalDirham is an important test step before the UAE government decides to expand the use of this digital currency to both the public and private sectors. The ultimate goal is to create a more flexible, secure, and efficient payment system that aligns with the UAE's vision of becoming a global advanced financial and technology hub.
However, it is important to note that the UAE's Digital Dirham is still in the trial phase. On the global #CBDC map, only three countries have officially launched and are using their national digital currencies, including Nigeria, Bahamas, and Jamaica. Meanwhile, 49 other countries, including the UAE, are still actively researching and testing this technology. This indicates that while CBDCs are an irreversible trend, the transition from trial to full deployment is a long journey that requires caution regarding legal, technical, and risk management aspects.
The CBDC trial #UAE positions this country at the forefront of financial innovation in the Middle East. Unlike decentralized cryptocurrencies like Bitcoin, CBDCs are issued and backed directly by the Central Bank or monetary authority of the country, providing the inherent stability and reliability of national currency. The Digital Dirham, when fully deployed, will not only change how people and businesses in the UAE make payments but also has the potential to deepen the role of the Dirham on the international stage.
This first transaction achievement is a clear signal to the global financial community that the UAE is taking specific and swift steps. The next phase will be to gather data from the trials, assess the impacts on the current financial system, and build the necessary legal framework to ensure that the Digital Dirham operates safely and efficiently. This process will shape not only the monetary future of the UAE but also create a model for many other countries considering issuing CBDCs.
