UAE joins GovCoin currency race

The United Arab Emirates becomes the latest country to announce the launch of a CBDC amid clamour to become one of the top 10 national banks

The Central Bank of the UAE has announced plans to launch its own GovCoin amid a global race for central bank digital currency supremacy.

The proposed central bank digital currency (CBDC) is part of a broader 2023-2026 strategy – a plan that aims to help the UAE central bank grow into one of the largest in the world.

This announcement comes as news breaks of the European Central Bank approving the next stage of the Digital Euro.

The strategy has seven overarching goals, with the CBDC forming a central requirement.

A bank official told Gulf News that a digital currency would be key to future-proofing the UAE’s fintech industry, ensuring the bank innovates to keep up with the latest financial technologies and remains competitive in a digitalised world.

“Issuing a digital currency and driving digital transformation in the UAE’s financial services sector, by utilising the latest artificial intelligence and big data solutions is at the heart of the 2023-2026 strategy,” said the CBUAE spokesman.

The inter-connectedness of the CBUAE strategy will operate to facilitated cross-border commerce in a sophisticated capacity, with planned usage in monitoring and evaluation, inspections, insurance systems, and in conjunction with the UAE Pass (a digital ID).

Crypto adoption in the UAE

The UAE has been slow to move on crypto adoption, with concerns surrounding the volatility and potential for criminality inherent to cryptocurrencies. However, the country has ramped up its crypto integrations and ambitions in recent years.

This isn’t the first news of a UAE cryptocurrency. In 2018 a joint-announcement with the Kingdom of Saudi Arabia saw the countries launch a proof of concept project through the creation of a jointly-owned cryptocurrency – the Aber – which helped contribute to the body of knowledge surrounding Arabian CBDCs.

The Aber was pivotal, not only in providing a proof of concept for this week’s CBDC announcement, but also for highlighting the potential of cryptocurrency integration within the UAE state infrastructure.

The Dubai Department of Finance (DoF) created a blockchain-powered Payment Reconciliation and Settlement platform in partnership with the Smart Dubai Office (SDO).

The platform is now used for transactions across the Dubai government office, this has led to a huge efficiency saving. In the past traditional central bank transactions could take up to 45 days to process.

In November last year, the UAE Securities and Commodities Authority (SCA) established a national framework for cryptocurrency regulations following on from consultations with the crypto industry and the general public.

The regulations include a licencing regime aimed at facilitating FinTech companies to work in the crypto space, providing regulatory coverage for ICOs, exchanges, and crypto traders.

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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice.

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