The Ministry of Finance (MoF) and the Dubai Department of Finance (DOF), in collaboration with the Central Bank of the UAE (CBUAE), executed the first-ever government financial transaction using the Digital Dirham.
The transaction was completed in less than two minutes, and thus highlighted the speed, efficiency, and reliability of the new central bank digital currency (CBDC) of the UAE. This achievement forms part of the pilot phase of the Digital Dirham project. It was initiated by the Central Bank of the UAE under the Financial Infrastructure Transformation (FIT) Programme in coordination with local financial authorities.
What Is the Digital Dirham?
The Central Bank Digital Currency Strategy also called as “the Digital Dirham” is one of the initiatives of the Financial Infrastructure Transformation (FIT) Programme that aims to accelerate the digital transformation of the financial services sector. The FIT Programme was launched by the Central Bank of the UAE.
The Central Bank Digital Currency (CBDC) is a type of digital money that is issued and guaranteed by the central banks. It is safe to use, cost-effective, and efficient for making payments and settlements.
Objectives of UAE CBDC (Central Bank Digital Currency):
- Support UAE digital transformation
- Solve issues in domestic and cross-border payments
- Promote financial inclusion and a cashless society
- Strengthen payment infrastructure with secure, reliable channels
- Ensure a resilient financial system
- Prepare UAE for tokenization of financial and non-financial activities
The Central Bank of the UAE (CBUAE) is building a future-ready payment system that connects with global digital finance and supports innovation in the tokenized economy.
Why This Matters
The Digital Dirham is a much different payment system. It is a kind of national digital currency that is regulated by the UAE Central Bank. Unlike cryptocurrencies such as Bitcoin and Ethereum, the Digital Dirham is regulated, stable, and issued by the government; hence, it is trustworthy and secure for citizens and businesses.
Some of the important features include:
- Speed: Payments are settled within minutes.
- Cost: It minimizes reliance on intermediaries such as banks or remittance companies.
- Transparency: All transactions are traceable, therefore lowering the risk of fraud and money laundering.
- Financial inclusion: Easier access to digital payments for people who do not have traditional bank accounts.
Part of the UAE’s FIT Programme
The FIT (Financial Infrastructure Transformation) Programme, inaugurated by CBUAE, intends to modernize the overall financial system of the country. The Digital Dirham is one of its flagship programs.
The FIT Program aims to:
- Increase adoption of digital payments in government and private sectors.
- Strengthen the role of the UAE as an international hub for fintech innovation.
- Facilitate cross-border trade via blockchain-based payment solutions.
This first transaction signals that the UAE is set to roll out the use of CBDCs for daily activities starting with governmental payments.
Benefits for Everyone
| Group | Benefit |
| Government departments | Faster payments, lower costs, better accuracy |
| Citizens | Quicker services, more transparency |
| Businesses | Easier transactions with government and global partners |
| UAE economy | Stronger digital infrastructure, global recognition |
How It Works
The Digital Dirham operates on Distributed Ledger Technology (DLT), which is a form of blockchain. It allows secure and tamper-proof transactions. Unlike traditional online transfers that can take longer, CBDC aims to reduce settlement time.
The mBridge platform for multiple central bank digital currencies (CBDCs) was developed and implemented by the Central Bank. This allows government entities to conduct financial settlements securely and reliably using the Central Bank digital currency.
The platform is fully integrated with the UAE’s Digital Dirham initiative to allow a single unified channel for the issuing, receiving, and settling of government payments in a fully digital manner without intermediaries.
What’s Next?
The UAE aims to expand the Digital Dirham into more government departments and services to make payments faster, safer, and more efficient. With the mBridge platform and smooth digital infrastructure, the UAE provides the means for real-value cross-border CBDC transactions to support international trade settlement.
How Can FAR Middle East Consultancy Assist You?
Do you want to stay ahead in the digital economy here in the UAE? FAR Middle East Consultancy supports both businesses and government partners in understanding the frameworks of Digital Dirham and mBridge transparently, compliantly, and confidently. For more information don’t hesitate to contact us.
FAQs on the Digital Dirham in the UAE
Unlike cryptocurrencies like Bitcoin or Ethereum, the Digital Dirham is:
- Backed by the government and recognized as legal tender.
- Stable because its value is linked with that of the UAE Dirham.
- Regulated in compliance with the Financial Laws of the UAE.
- Fast transactions.
- Lower costs by reducing the number of intermediaries.
- Safe and sound, guaranteed by the Central Bank of the UAE.
- Favors Cross border payments to support global trade linkages.
