Amid the Bitcoin craze, the United Arab Emirates joins the global race for the “CBDC” or Central bank digital currency. However, with the announcement of launching its own digital currency via its central bank by 2026, the small Middle Eastern state that has traditionally strived to be first in terms of new technologies is not at the forefront in this regard. Such is the currency control issue that China is furthest along for the time being, with an initial testing phase of its digital yuan, which launched in March.
It should be noted that in February 2021, the Bank for International Settlements (BIS) also announced an initiative between the Central Bank of the United Arab Emirates and the Central Bank of China on a shared infrastructure for international money transfers. Called the “Multiple CBDC bridgeIt brought together the BIS Innovation Hub, the People’s Bank of China (PBC), the Hong Kong Monetary Authority and the Bank of Thailand.
But unlike China, which is trying to ban or drastically reduce activities related to cryptocurrencies (these digital currencies developed thanks to the blockchain protocol) in order to retain a central power, the Emirates intend to bitcoin and the state allow currency.
In fact, the mechanics of blockchains diverge between Bitcoin and Ethereum, the two top-ranked cryptocurrencies among 9,000 digital assets, and CBDCs. The former advocate an open – or public – blockchain, where governance is horizontal and decentralized. The second operate on the principles of a private and centralized blockchain, where a state or private actor retains control over exchanges and entry fees.
two parallel worlds
On this last pattern, the Emirati institution is logically positioned. The central bank will “issue virtual currency and work towards digital transition of Emirates financial services”, she said in a statement released by official agency WAM. This announcement is part of “its strategy 2023-2026” who is aiming “Place it in the top ten central banks in the world”She added.
At the same time, in June Nasdaq Dubaia major financial market in the United Arab Emirates, announced the listing of “Bitcoin fund”, via a fund based on digital assets. The very first to be listed in the Middle East and North Africa.
Similarly, Dubai has created “free zones” for its airport that offer a license to companies that accept payments in cryptocurrencies.
As early as 2019, the city of Dubai in the emirate announced that it would be the first state to operate its public services via blockchain. In the same year, Saudi Arabia and the Emirates announced a test phase of a common cryptocurrency for transactions between banks of two countries.
The acceleration of central banks
Also, several central banks around the world have recently announced similar plans while also criticizing decentralized cryptocurrencies like Bitcoin.
The central banks of the United States, the European Union and England are also exploring the possibility of launching their own digital currency. To speed things up, the Bank for International Settlements (BIS) is also working with central banks on a digital currency project for the general public.
By launching digital currencies, these public institutions claim to want to bring stability to this very speculative sector.
Bitcoin, by far the largest asset in the cryptocurrency market, was created in 2008 to counteract the abuses of global finance following the financial crisis and has steadily attracted institutional investors as well as individuals.