The creation of a CBDC aims to address cross-border payment inefficiencies and promote innovation in domestic payments.
As the first phase of its recently launched financial infrastructure transformation (FIT) program, the Central Bank of the United Arab Emirates (CBUAE) intends to introduce a central bank digital currency (CBDC) for both domestic and international use.
Financial Infrastructure Transformation Program
The CBUAE recently announced the FIT program and emphasized its goal of assisting the nation’s financial services industry. The program, according to the central bank, would support digital transactions in addition to boosting the UAE’s competitiveness as a hub for finance and electronic payments.
The issuing of a CBDC is part of the FIT program’s initial phase. The central bank claims that issuing a CBDC would “address the problems and inefficiency of cross-border payments and help drive innovation for domestic payments, respectively.” Khaled Balama, Governor of CBUAE, believes the FIT program will “support a thriving UAE financial ecosystem and its future growth.“
During the first stage of the program, the government also intends to introduce a CBDC, a unified card payment platform to “facilitate the growth of e-commerce,” and an instant payments platform to “support financial inclusion and enable a cashless society.”
Nine Stages
In totality, the FIT program consists of nine initiatives, including the ones to be carried out in the first stage. Following the initial stage, initiatives will include an innovation hub and an e-Know Your Customer platform.
On Feb. 7, Dubai’s virtual asset regulatory authority (VARA) released its long-awaited “Full Market Product Regulations,” which includes comprehensive guides on virtual asset activities for projects operating within the emirate. The laws include a ban on issuing “anonymity-enhanced cryptocurrencies,” also commonly dubbed as “privacy coins,” and related activities.
On February 10, a number of stakeholders in the UAE voiced their opinions in response to the recent development. Co-founder of Crypto Oasis Saqr Ereiqat recently told Cointelegraph that privacy coins are distinct from tradable digital currencies like Bitcoin and Ether. The executive claims that they pose a special challenge due to their capacity to facilitate illegal activities.
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