Technology & Innovation

UAE residents will soon be able to pay in stores, transfer money to friends, and even give pocket money to their children entirely through digital means, thanks to the Digital Dirham — the Central Bank of the UAE’s (CBUAE) upcoming digital currency initiative.

Expected to roll out for retail use in Q4 2025, the Digital Dirham aims to serve as a fully fungible digital alternative to physical cash, marking a major milestone in the country’s transition to a digital economy.

The CBUAE has developed a comprehensive digital platform for issuing, trading, and using the Digital Dirham. This includes a secure digital wallet for individuals and businesses, designed to facilitate all types of financial transactions across online, in-store, and peer-to-peer channels.

Innovative Use Cases and Applications

In preparation for the rollout, the Central Bank tested four digital economy use cases as part of its pilot program:

• Fractional ownership of tokenised assets

• Smart tourist wallet

• Programmable social benefit payments

• Parent-child sub-wallet for managing pocket money

One key example is the Ministry of Community Development (MOCD)’s use of programmable Digital Dirhams to distribute food subsidies, allowing funds to be controlled and monitored for compliance in real time.

The prototype Digital Dirham App enables users to:

• Choose wallet providers

• Top up accounts

• Make payments

• Acquire and redeem digital dirhams

• Use built-in features for specific use cases

Gradual Implementation Strategy

The CBUAE is implementing the Digital Dirham through a phased rollout. This approach includes comprehensive policy guidance, a secure infrastructure, and collaborations with both local and international partners such as other central banks, commercial banks, exchange houses, and regulatory bodies.

The retail version of the Digital Dirham will be:

• Non-interest-bearing

• Fully exchangeable with physical cash and bank deposits

• Used primarily for payments, not as a savings instrument

The currency will support:

• Peer-to-peer (P2P) transactions

• Business-to-consumer (B2C) payments

• Business-to-business (B2B) transactions

• Government-to-consumer (G2C) interactions

In its second phase, the CBUAE plans to explore cross-border CBDC arrangements to enhance global financial integration and enable interoperability with foreign central banks and systems.

Paving the Way for Financial Inclusion

The CBUAE’s report on the Digital Dirham highlights its potential to promote financial inclusion, especially among the unbanked and non-residents. By leveraging cutting-edge financial technologies, the initiative aims to increase efficiency, security, and speed in monetary transactions.

The development of the Digital Dirham has been guided by global best practices and standards set by institutions such as the International Monetary Fund (IMF) and the Bank for International Settlements (BIS), ensuring the digital currency is secure, resilient, and easy to use.

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