Tuesday, March 5, 2024
Editor's PickUAE unveils new program to boost digital transformation with issuance of digital...

UAE unveils new program to boost digital transformation with issuance of digital currency

The Central Bank of the UAE (CBUAE) has launched a new program to accelerate digital transformation in the financial services sector, with initiatives of the first stage including a series of digital payment infrastructures and services as well as the issuance of a Central Bank Digital Currency (CBDC) for cross-border and domestic uses.

“These digital payment initiatives will drive financial inclusion; promote payment innovation, security and efficiency; and achieve a cashless society,” the regulator said in a statement.

On the CBDC, the CBUAE said that it will be utilized to “address the problems and inefficiency of cross-border payments and help drive innovation for domestic payments respectively”.

The CBDC refers to a form of digital currency that is issued by a country’s central bank. It is similar to cryptocurrencies, except its value is fixed by the central bank and equivalent to the country’s fiat currency.

According to the CBUAE, the Financial Infrastructure Transformation (FIT) program aims to support the financial services sector, promote digital transactions and enable the UAE’s competitiveness to become the financial and digital payment hub and a center for innovation and digital transformation.

As part of the FIT program, the CBUAE will also adopt advanced supervisory technologies and data management solutions to implement robust supervisory processes and ensure financial stability.

On the next stage of the FIT program, the CBUAE looks to develop and implement a number of digital infrastructures, including the establishment of financial cloud, eKYC [electronic know-your-customer] and open finance platforms.

“These digital infrastructures will improve regulatory compliance, reduce cost of operation, enhance innovation and customer experience and most importantly, strengthen their security and operational resilience,” the central bank said, adding that a full integration of the program is set for 2026.

It is observed that governments and central banks worldwide are exploring the possibility of using government-backed digital currencies, following a rise in the popularity of cryptocurrencies, but with a legal cover to curb criminal use of the otherwise unregulated digital currencies.

For instance, the Saudi Central Bank announced last month that it was carrying out experiments with a CBDC in cooperation with other financial institutions and fintech firms.

Oman’s central bank is also developing a digital currency and open banking service, the CEO of the Central Bank of Oman announced at a conference in Muscat last year.

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