Global Survey Shows Central Banks Embrace CBDCs, with UAE Among Pioneers

Central banks around the world are increasingly exploring the potential of central bank digital currencies (CBDCs), as highlighted by a recent survey conducted by the Bank for International Settlements (BIS).

The survey, which included responses from 83 central banks, revealed a significant rise in CBDC-related activities among central banks in advanced economies throughout 2023. The data shows a 35% increase in proof of concept projects and a near tripling of CBDC pilot programs compared to the previous year.

“The survey suggests that central banks are proceeding at their own speed, taking diverse approaches and considering different design features,” noted BIS researchers in a June 2024 report.

Increased Interest in CBDCs

Of the 83 central banks that participated in the survey, 28 were from advanced economies and 58 from developing economies. The survey indicated that 54% of these institutions are involved in proofs of concept or technologies related to CBDC issuance. Additionally, approximately one-third of the surveyed central banks are conducting CBDC pilots.

Among advanced economy central banks, 81% are engaged in wholesale CBDC-related proof of concept experiments, and 33% are conducting pilots, marking a significant increase from the previous year's 60% and 10% respectively. Conversely, central banks in emerging and developing economies (EMDEs) are progressing at a slower rate, with around one-third working on proof of concept experiments and only 19% on pilots, showing little change from the prior year.

UAE’s Pioneering Efforts in CBDC Development

The United Arab Emirates (UAE) has been diligently advancing its central bank digital currency (CBDC) agenda over a significant period. Recent headlines suggesting newfound developments might be misleading, as the Central Bank of the UAE (CBUAE) has long been engaged in this endeavor. The CBUAE has already forged agreements with R3 Corda for its infrastructure and successfully conducted various pilots.

UAE Central Bank Advances Cross-Border Payments with mBridge MVP Launch

The CBUAE has recently achieved a major milestone by launching the Minimum Viable Product (MVP) of its mBridge platform. This collaborative effort, which includes central banks from Hong Kong, Thailand, and China, along with the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre, marks the world's first multi-central bank digital currency (CBDC) platform to reach the MVP stage.

Early Success Sets the Stage

In January 2024, the UAE executed its first real-value cross-border CBDC payment using mBridge, transferring AED 50 million with the "Digital Dirham." This landmark transaction highlights the project's potential to transform cross-border payments in the MENA region.

Several leading financial institutions (LFIs) in the UAE have already integrated with the mBridge platform, facilitating seamless cross-border CBDC transactions with partners in participating jurisdictions. Efforts are ongoing to further accelerate adoption among additional institutions.

Revolutionizing Payments with Distributed Ledger Technology

The mBridge platform utilizes distributed ledger technology (DLT) to provide a faster, more efficient, and cost-effective alternative to traditional cross-border payment systems. This innovative approach aims to streamline international trade and collaboration by enabling instant settlements in central bank money.

Future Plans for Domestic Use

The successful launch of the mBridge MVP represents Phase 1 of the CBUAE’s comprehensive CBDC strategy. Phase 2 will focus on implementing domestic CBDC payments within the UAE, further enhancing cross-border fund transfers and overall financial efficiency.

CBUAE Governor Khaled Mohamed Balama emphasized the project’s transformative potential: “Our participation in mBridge reflects our commitment to innovation and efficiency in financial services. This collaboration has the potential to revolutionize global payments, creating a more robust and interconnected infrastructure for all.”