UAE is Undergoing Financial Transformation, Set to Launch its CBDC

The Central Bank of the United Arab Emirates announced that it will soon be launching its Central Bank Digital Currency (CBDC) to facilitate digital transactions in its economy. 

As per the recent trend, economies around the world are emphasizing the innovation in blockchain space. To trigger blockchain adoption in the country, most central banks are working toward developing their own digital currencies. In light of these scenarios, the UAE which is known as the center of blockchain events in the world is planning to deploy its CBDC. 

The Central Bank of the UAE has recently launched its Financial Infrastructure Transformation (FIT) program that will enable its economy to align with the long-term goal of becoming the hub of technological innovation. This program consists of nine key actionable steps which include the development of a digital payment mechanism along with the issuance of the first CBDC. 

The CBDC will ensure more cost-effective and efficient cross-border transactions while also facilitating swifter domestic transitions in the economy. Apart from launching the CBDCs, CBUAE is also working towards developing a unified card payment platform to promote a cashless society. 

Problems that CBDCs can Solve for the UAE?

The UAE economy can make use of CBDCs in multiple ways including:

A Leap Towards Inclusive Finance -  The government of the UAE has registered one of the highest financial inclusion rates in the Middle East region. However, the traditional modes of payment and the high transaction costs involved create a dire need for efforts toward a digital economy. CBDCs could be a tool that can make it happen for the UAE and remove the upper cap on its financial inclusion initiatives. 

Transforming the Legacy Payment Mechanism - The average cost of cashing out cash is as high as $5 in Dubai, with a sloppy mechanism to deal with the increasing liquidity in the economy. CBDCs can transform this legacy payment mechanism and replace it with highly efficient blockchain technology. 

Cost of Printing and Storing Cash - There is a very high cost involved in printing and storing the UAE Dhirams which involves the risk of counterfeit currency. CBDCs can simply cut down the cost involved while also making financial transactions much simpler and faster. 

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