The Central Bank of the United Arab Emirates completed the pilot phase of its CBDC dubbed mBridge which will propel the region into becoming a global CBDC hub.
The United Arab Emirates Central Bank (CBUAE) completed the world’s largest pilot of CBDC transactions. Other regulators involved in the pilot program include the People’s Bank of China’s Digital Currency Institute.
The CBUAE dubbed the project mBridge. The project demonstrated faster, cost-effective and secure cross-border monetary settlements. The mBridge will use Central Bank Money.
The pilot project
The pilot project experiments with cross-border payments using a common platform. This was based on a distributed ledger technology (DLT) which Central banks can use.
Through the pilot project, the Central Bank can use the technology to issue and exchange their CBDCs. Across the globe, Central banks continue to develop CBDCs.
The Central Bank seeks to provide an alternative to cryptocurrencies. However, these financial institutions are still grappling with technological complexities.
Apparently, over 100 countries continue to use or look into Central Bank Digital Currencies. This represents 95% of the World’s GDP. The pilot project took six weeks to be implemented.
The Hong Kong Monetary Authority, the Bank of Thailand and the Bank for International Settlements conducted the pilot. The Digital Currency Institute of China also took part in the pilot project.
The pilot saw commercial banks in four jurisdictions use mBridge for 160 payment transactions. The phase also involved foreign exchange transactions totaling more than 80 million dirhams ($21.78 million).
Also read: UAE Ministry of Economy Launches New Address on Metaverse
Impact of the CBDC in UAE
According to Khaled Mohamed Balama, CBUAE’s governor, the pilot forms part of UAE’s plan. The Central Bank of UAE plans to support the UAE’s competitiveness, diversity and growth of the financial sector.
This falls in line with future economic trends. The central bank also promised to set up a governance framework. The framework will serve interoperable CBDCs to deliver tangible benefits to UAE companies and consumers.
Earlier this month, the financial messaging system (SWIFT) laid out a blueprint for CBDCs. SWIFT plans to incorporate a global Central Bank Digital Currency network. This follows an 8-month experiment on different technologies and currencies.
CBDC coverage globally
Khaled insisted that the pilot reflects the leadership vision of the UAE. The pilot project will make the UAE one of the leaders in CBDC development and issuance. This will make UAE the preferred regional hub for advanced financial infrastructure.
CBUAE will eventually become among the top central banks globally. However, the pilot comes as officials in the US express doubts about the country’s willingness to develop its own CBDC.
11 countries already launched their Central Bank Digital Currencies. In addition, 14 countries are currently in the pilot stage.
