The Central Bank of the United Arab Emirates has successfully completed its first cross-border transaction in Central Bank Digital Currency. The announcement comes from the central bank itself which says it worked closely with other partner banking institutions. The banking institution also announced that it had carried out the transaction under the mBridge project.
A successful CBDC transaction in the UAE
Known as a crypto-friendly state, the United Arab Emirates (UAE) is steadily developing its digital economy. The country’s Central Bank announced in a statement the success of the first experiments in cross-border payments via the central bank’s digital currency. The operation was carried out within the framework of the mBridge project, which develops international payments in central bank digital currency (CBDC).
In addition, several actors actively participated in the success of this transaction:
- The Digital Currency Institute of the People’s Bank of China;
- The Hong Kong Monetary Authority;
- The Bank of Thailand;
- The Bank for International Settlements.
The Central Bank of the UAE seems satisfied with this first experimental use of CBDC.
Khaled Mohamed Balama, Governor of the Central Bank of the UAE, said the transaction reflects his institution’s commitment to creating a world-class financial infrastructure and an innovative and competitive payment system.
He also praised mBridge, the project under which the trial transaction was conducted. Launched in November 2021, this project aims to develop cross-border transactions via the Central Bank Digital Currency.
For the Governor of the UAE Central Bank, the mBridge project has demonstrated its cost effectiveness, speed and security in processing international transactions via CBDC. This could have a positive impact on regional and international trade, says the institution.
The mBridge reflects the leadership vision for the UAE to be a leader in CBDC development and issuance and the regional hub for advanced financial infrastructure. This project is part of the UAE central bank’s plan to support the competitiveness, diversity and growth of the UAE financial sector in line with future economic trends. We will continue to establish the right governance framework for interoperable CBDCs to deliver tangible benefits to UAE businesses and consumers.Khaled Mohamed Balama, Gov of UAE Central Bank
The Emirates CBDC could facilitate international fund transactions. But, these efforts would have more impact if they were directed towards the development of crypto. Indeed, the CBDC is highly centralized and endorsed to the national currency. This poses a danger to the freedoms and finances of its users. Note, however, that since cryptocurrencies are allowed in the UAE, a country where the tax rate is 0% in many cases, everyone is free to choose the solution that suits them. Therefore, freedom is not threatened here.
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