The United Arab Emirates has made a significant update since announcing the project in March, completing the first transaction of its central bank digital currency.

The UAE Ministry of Finance and the Dubai Department of Finance stated on Tuesday that the transaction is part of the pilot phase of the digital dirham project and utilized the government payment platform mBridge.

These institutions indicated that the transaction marks the UAE government's first attempt and is "a step towards broader adoption of the national digital currency in government and private sector operations."

This is the first major update on the central bank digital currency (CBDC) since the UAE Central Bank indicated in March that it expects the digital currency to be launched in the fourth quarter of 2025.

Ahmed Ali Meftah, Executive Director of the Central Accounts at the Dubai Department of Finance, stated that the transaction was conducted to "test operational readiness and ensure seamless technical integration with the central bank system."

In a policy document released in July, the UAE Central Bank stated that the CBDC is an attempt to future-proof central bank currency for the digital age and a response to the evolving demands of the digital economy.

The document also noted that the launch will be phased, with the CBDC's functionality limited to payments at launch to avoid competition with savings and other interest-earning financial products.

CBDCs are a controversial topic, with critics concerned that they may infringe on privacy and undermine the financial sector by allowing users to become direct customers of the central bank, while supporters argue that CBDCs can enhance payment efficiency and expand financial inclusion.

Many governments have been experimenting with CBDCs. In October, Kyrgyzstan confirmed plans to issue a central bank digital currency, while the European Central Bank decided to advance the next phase of its digital euro project.

However, according to data from the American think tank Atlantic Council, only three CBDCs have been officially launched to date.

Its CBDC tracker lists Nigeria, the Bahamas, and Jamaica as the only three jurisdictions with active CBDC tokens, while another 49 countries are in the pilot phase.

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Original article: “UAE Completes First 'Digital Dirham' Transaction in CBDC Pilot”

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