Last week we witnessed the launch of the digital dirham by the UAE via a payment on the cross-border mBridge network, which currently connects central banks in the UAE, China, Hong Kong and Thailand. The first transfer was for 50 million UAE dirhams sent to China.
The digital dirham is a central bank digital currency, or CBDC for short – which are similar to stablecoins in the crypto world, but issued directly by central banks, giving them the same trust and credibility as traditional currencies.
The UAE government website states that the move towards issuing a digital currency comes as part of the UAE’s digital transformation plan, and its goal to become a cashless society, in order to facilitate and accelerate domestic and cross-border payments, and enhance financial inclusion.
The mBridge network started development in 2021 in cooperation with the Bank for International Settlements, and today is capable of processing international payments between the UAE, China, Hong Kong and Thailand instantly using distributed ledger technology. More countries from different continents may join the network over the coming years.
A 2022 study by the Bank for International Settlements showed that 90% of central banks globally are exploring the possibility of issuing central bank digital currencies. And according to the Atlantic Council website, 11 countries have issued CBDCs so far, 21 are in the testing phase, 33 in development, and 46 in research.
