Digital Dirham and the Future of Money in the UAE

June 15, 2025

Introduction: The Symbol Launch

On 27th March 2025, the Central Bank of the UAE (CBUAE) introduced a new official symbol for the UAE’s national currency, the Dirham. This marked a historic milestone in the country’s monetary evolution, aligning UAE’s Dirham with internationally recognised currencies of major economies such as the US Dollar ($), Euro (€), Yen (¥), and Indian Rupee (₹) among many others. This reflects the UAE’s broader ambition to strengthen its position as an important player in the global financial system.

In addition to the announcement, the CBUAE confirmed significant progress on the Issuance and Circulation Programme for the Digital Dirham, the UAE’s forthcoming Central Bank Digital Currency (CBDC). The official retail launch is expected to be in the last quarter of 2025. Upon rollout, individuals and businesses can access and use the Digital Dirham through licenced financial institutions, including banks, exchange houses, finance companies, and fintech firms.

The symbol for the Digital Dirham features a circle surrounding the original currency mark and draws inspiration from the UAE’s national flag’s colours. The design is truly profound in embedding the UAE’s national identity with one of its important technological milestones, symbolising the UAE’s ambition to lead the digital economy.

Source: Emirates News Agency-WAM [1]

In this blog, we will look at the journey towards the UAE’s launch of the Digital Dirham symbol and the growing trend among countries in exploring the possibilities of incorporating Central Bank Digital Currencies (CBDCs) in their mainstream economy. We will also place the upcoming launch of the Digital Dirham in the context of the UAE’s broader digital transformation under the Financial Infrastructure Transformation (FIT) Programme.

What are CBDCs?

Central Bank Digital Currencies (CBDCs) represent digital forms of money issued by central banks. Unlike cryptocurrencies such as Bitcoin or Ethereum, which can experience significant price fluctuations, CBDCs are fully backed by national governments and maintain a stable value equal to the country’s official fiat currency.

CBDCs are direct liabilities of the central bank, just as physical banknotes are. This is what makes CBDCs a safer form of digital money than multiple other options.

CBDCs generally take two forms:

Wholesale CBDCs: Used by banks and other licenced financial institutions for interbank settlements or securities transactions. Banque de France launched a wholesale CBDC programme in 2020. [2]
Retail CBDCs: Available to consumers and businesses, primarily accessed through digital wallets that link directly to central bank money.

How does Digital Dirham help the UAE?

a. Monetary Policy: The Digital Dirham could become a powerful tool for enhancing the UAE’s monetary policy. As a central bank digital currency, it would give the UAE Central Bank access to real-time data on money flows, making monetary decision-making more precise. Its effectiveness will enhance as Digital Dirham becomes more and more popular and adopted extensively. According to an IMF report [3], in some countries, improving the effectiveness of monetary policy is often the main reason for adopting a CBDC. [4] In others, the focus is on upgrading outdated financial systems and reducing the cost of simple transfers between people.

b. Trust and Ease: Digital Dirham could give households and businesses access to a safe, digital form of central bank money—offering the same stability and liquidity as cash, but in the electronic form. It would also provide entrepreneurs with a platform to develop new financial products and services, support faster and more affordable payments (including cross-border transactions), and broaden access to the financial system, especially for underserved populations. Digital Euro’s purported aim [5] is to ensure that central bank money remains relevant and future-proof by aligning with people’s growing preference for digital payments—combining the trust and security of public money with the convenience of modern payment methods. Digital Dirham is geared toward a similar objective

c. Reduced Dependence on Dollar: In heavily dollarised economies, a CBDC can help reduce reliance on foreign currencies—particularly the US dollar—by promoting greater use of the national currency, especially in international trade, even though interoperability is still a concern. At the Central Banking Autumn Meetings 2024 in Mexico City, a board member from a Latin American central bank remarked, “I think dedollarisation is pushing central banks to issue CBDC.” [6] A study by Morgan Stanley [7] also noted that CBDCs have the potential to create a more unified standard for cross-border payments that could lower dependence on traditional intermediaries such as SWIFT and reduce the dominance of major global currencies such as the US dollar. For the UAE, the Digital Dirham could elevate Dirham’s role in international trade—especially as evident in initiatives such as the mBridge project, which we’ll explore later.

d. Enhanced Security and Efficiency: By using blockchain technology, the Digital Dirham assures secure, transparent, and tamper-resistant transactions. It would also contribute to effective risk management and data protection. This kind of digital integrity would not only reduce operational costs but also enhance trust among users and regulators alike—while helping to combat financial crimes more effectively.

e. Lower Transaction Costs: Handling cash involves a lot of hidden costs—from printing and transporting to secure storage. Even digital payments today often pass through multiple intermediaries, each adding their own fees. A state-issued digital currency such as the Digital Dirham could streamline this entire process, reducing overheads for both banks and businesses.

f. Faster Settlement: Blockchain-based payment networks facilitate near-instant transaction settlement, in contrast to the slower processes of conventional banking systems. This speed frees up liquidity, provides a smoother customer experience, and helps businesses optimise cash flow.

Journey to the Launch of Digital Dirham Symbol

The UAE’s Blockchain Vision: The UAE has a clear ambition to lead the world in blockchain technology. In April 2018, it launched the Emirates Blockchain Strategy 2021[8] to advance the integration of blockchain across government transactions. When completed,

the UAE Government will save 398 million printed documents annually, 77 million annual work hours and billions in transaction costs [9]. Over the years, multiple regulatory bodies—including the Securities and Commodities Authority (SCA), the Virtual Assets Regulatory Authority (VARA), the Abu Dhabi Global Market (ADGM), and the Dubai Financial Services Authority (DFSA)— developed comprehensive regulatory frameworks to govern virtual assets, regulate virtual asset service providers (VASPs), and support futuristic blockchain solutions.

Project Aber: A major movement towards the introduction of a national digital currency began in January 2019 with Project Aber. [10] Project Aber was a joint initiative between the central banks of Saudi Arabia and the United Arab Emirates. It explored the feasibility of a dual-issued digital currency for both domestic and cross-border settlements. Three major use cases were:

Payments between central banks
- Domestic Payments between Commercial banks
- Cross-border Payments between Commercial banks

The project demonstrated that a jointly issued digital currency is technically viable and that a decentralised payment system could offer improved resilience, efficiency, and security compared to traditional centralised systems. By meeting or exceeding all performance targets, the project also demonstrated that a decentralised payment system can offer greater resilience than traditional centralised infrastructures, while still meeting strict requirements for privacy and security.

Project mBridge: Another milestone in this journey was Project mBridge [11], which advanced the concept of cross-border CBDCs using a shared distributed ledger technology (DLT) platform. In 2022, central banks from the UAE, Hong Kong, China, and Thailand conducted real-value transactions using CBDCs on the mBridge ledger. Between 15^th August and 23^rd September 2022, 20 commercial banks from Hong Kong SAR, Mainland China, the UAE and Thailand conducted transactions on behalf of their corporate clients using the CBDCs issued on the mBridge platform by their respective central banks. [12]

The pilot settled over USD 22 million through more than 160 payment and foreign exchange payment-versus-payment (PvP) transactions. The project demonstrated how a shared, multi-CBDC infrastructure could facilitate faster, cost-effective international trade settlements while adhering to jurisdiction-specific legal, regulatory, and governance frameworks. In January 2024, the first cross-border payment using the Digital Dirham—CBUAE’s CBDC—was executed through mBridge, transferring AED 50 million to China. [13] This also marked the first real-value cross-border CBDC transaction between a MENA country and a non-MENA nation on a minimum viable product (MVP)-ready platform.

MoU with India- The Central Bank of the UAE (CBUAE) and the Reserve Bank of India (RBI) signed an MoU in Abu Dhabi on March 15, 2023, for deeper bilateral cooperation and driving meaningful innovation in financial products and services, focusing on Central Bank Digital Currencies (CBDCs). [14] They plan to explore interoperability between each nation’s CBDC and conduct proofs-of-concept and pilot projects for a bilateral CBDC bridge, facilitating cross-border transactions in remittances and trade. The MoU also includes technical collaboration, knowledge sharing, and policy alignment.

Financial Infrastructure Transformation (FIT) Programme: It is important to note that the Digital Dirham forms part of the CBUAE’s Financial Infrastructure Transformation (FIT) Programme, launched in February 2023. The FIT Programme consists of nine core initiatives, each focused on a specific area of financial modernisation, including:

Card Domestic Scheme: Establishing a unified platform for card transactions to support e-commerce and digital payments.

eKYC: Implementing a secure process to accelerate customer onboarding and enhance compliance.
Central Bank Digital Currency (CBDC): Introducing the Digital Dirham
Open Finance: Developing a framework to enable secure financial data sharing.

Supervisory Technology (SupTech): Leveraging big data and analytics to strengthen regulatory oversight.
Innovation Hub: Providing a collaborative space for fintech research, development, and testing.
Instant Payments Platform: Enabling real-time fund transfers across the financial ecosystem.

Financial Cloud: Offering secure, scalable infrastructure to support digital finance.
Excellence & Customer Experience: Promoting excellence through customer-centric innovation and service.

Technology Partners for Digital Dirham: In March 2023 the Central Bank of UAE (CBUAE) jointly held a signing ceremony with G42 Cloud and R3 to mark the commencement of the implementation of the CBUAE Central Bank Digital Currency (CBDC) Strategy. [15]

Legal Standing of the Digital Dirham: Federal Decree-Law No. (54) of 2023 [16] gives Digital Dirham legal standing at par with paper notes. As per Article 56 of the law, “Paper banknotes and digital currency issued by the Central Bank shall be an absolute legal tender valid for payment of any amount up to their full-face value.” This provision grants the Digital Dirham legal tender status and affirms its acceptance as a universal payment instrument across all outlets and transaction channels within the UAE.

The Digital Dirham Wallet
For convenient access to the Digital Dirham, the CBUAE has developed a dedicated wallet, designed to accommodate various transaction types:

Retail and wholesale settlements

Cross-border payments
Money transfers and withdrawals
Top-ups

Conversion of Digital Dirhams back into physical currency

Security remains paramount in this wallet’s design. Blockchain-based encryption safeguards all transaction records and user balances. The wallet seamlessly integrates with other emerging financial services as well.

Global Context: The Rise of CBDCs Worldwide

The UAE’s development of Digital Dirham is part of a global surge toward CBDC. As of February 2025, 134 countries and currency unions—representing 98% of the world’s GDP—are analysing, piloting, or preparing to launch CBDCs [17], a significant increase from just 35 in May 2020. As per the Atlantic Council’s CBDC tracker, the Bahamas, Jamaica, and Nigeria—have fully launched a CBDC. China’s e-CNY stands out as the largest ongoing CBDC pilot. In June 2024, it had surpassed 7 trillion e-CNY (approximately $986 billion) in transaction volume value across 17 provincial regions. The digital yuan pegged 1:1 to physical banknotes, does not pay interest and functions similarly to physical cash. China continues to maintain paper currency while steadily expanding its digital counterpart.

China’s digital yuan has slashed settlement times by 98% [18], delivering efficiency gains that are hard to ignore. As published in The Economic Times, six ASEAN nations, including Malaysia and Singapore, have incorporated the RMB into their foreign exchange reserves. Thailand has also completed its first oil trade settled in digital yuan. [19] Cross-border RMB settlement volume in ASEAN exceeded 5.8 trillion yuan in 2024—a staggering 120 per cent increase from 2021.

With rising trade wars and tariff barriers, CBDCs such as China’s are emerging as powerful alternatives for trade and settlement outside the US-dollar-dominated system. [20]

Digital Dirham and Programming the Future of Finance

On 27th March, when the new Digital Dirham symbol was unveiled, the Central Bank of the UAE sent a clear message: the future of money is digital, programmable, and secure. Along with this milestone, the bank highlighted two major advantages of the upcoming Digital Dirham—its role in financial development, and its ability to support tokenization and smart contracts.

Tokenization is the process of turning real-world assets—like real estate, shares, or commodities—into digital tokens that can be easily transferred, traded, and owned. As a stable, government-backed digital currency built on secure blockchain infrastructure, the Digital Dirham is likely to offer a reliable medium of exchange for such tokenised assets.

In addition, the Digital Dirham can be programmed into smart contracts—self-executing agreements that automatically release payments once specific terms are fulfilled. For example, a logistics company that uses a smart contract to pay its delivery partner could do so in Digital Dirhams. The contract could be set to release Digital Dirham funds the moment GPS data confirms delivery. While cryptocurrencies and stablecoins can be used for both tokenization and smart contracts, they come with volatility, regulatory uncertainty, and limited legal standing. The Digital Dirham, by contrast, offers legal tender status, sovereign backing, and full compliance with the UAE’s financial regulations—making it far more trustworthy for real-world use.