In recent months, initiatives surrounding central bank digital currencies, (CBDC) have gained traction as banking authorities attempt to streamline cross-border transactions and stimulate innovation in the payments industry.
Regulators in Asia, Europe, and South America are becoming more interested in implementing virtual currencies issued by their respective governments.
In the Gulf area, the Central Bank of the United Arab Emirates is looking to launch a digital currency for both domestic and international use.
The issuance of a digital version of the Emirates’ national currency, , is part of the program’s initial phase of financial infrastructure transformation (FIT). The central bank has in the pipeline nine initiatives for its CBDC.
UAE Central Bank Wants Its Own CBDC
The CBUAE announced on Sunday that these measures will include a local card scheme, a quick payments platform, a financial cloud, and state of the art supervisory system. After the initial phase, activities will include a center for innovation and an e-Know Your Customer gateway.
The Central Bank’s governor, Khaled Balama, welcomed the proposal. He stated that FIT represents the objectives and ambitions of the UAE’s leadership towards the digitization of the economy and the growth of the financial industry.
“We are proud to be building an infrastructure that will support a thriving UAE financial ecosystem and its future growth,” Khaled said.
This month, Dubai’s regulatory authority for virtual assets (VARA) published the Full Market Product Regulations template, which offers parameters for virtual asset activity in the region.
The guidelines restrict the production of “anonymity-enhanced cryptocurrencies,” sometimes known as “privacy coins,” as well as all actions related with them.
Global Economies Embracing CBDC
A CBDC is a digital version of the money that we use today, but it’s issued and controlled by a central bank, like the Federal Reserve or the European Central Bank.
It can be used to purchase products and services just like currency, but instead of being in your wallet, it would exist in a digital form that you can access via your smartphone or computer.
The world’s central banking institutions have been pushing to build CBDCs in an effort to give an alternative to crypto assets, despite the technological challenges involved.
The Bank of England and the Treasury have outlined a blueprint to create a new central bank currency, including a state-backed digital pound that could be deployed in the coming years.
In 2021, the Reserve Bank of India launched its maiden pilot program for the digital rupee, enabling some institutions to settle secondary market transactions in government bonds using the e-rupee. The Reserve Bank of India (RBI) wants to begin testing retail usage of the digital form of the Indian rupee.
In October last year, the UAE central bank and other regulators, notably the Digital Currency Institute of the People’s Bank of China, conducted the world’s biggest pilot of CBDC transactions.
In a recent analysis, the Boston Consulting Group predicted that the UAE’s payments industry revenue will increase to $19 billion by 2031, spearheaded by the country’s tech-savvy workforce.
According to the Atlantic Council, around 100 countries, comprising 95% of the world’s gross domestic product, are utilizing or planning to integrate CBDCs in their economies.
-Featured image by AutoJosh