The United Arab Emirates (UAE) is preparing to launch its Central Bank Digital Currency (CBDC), the Digital Dirham, later this year. This move positions the UAE among a growing number of countries embracing digital currencies to enhance payment systems, expand financial inclusion and strengthen monetary sovereignty.
The launch of the Digital Dirham is a key milestone in the UAE's efforts to create a more secure, transparent and cost-efficient financial ecosystem. It reflects a broader global shift as countries explore digital alternatives to traditional currencies.
The Global CBDC Landscape
As of May 2025, several countries have already introduced CBDCs, while many others are advancing through pilot and development phases. Notable examples include:
- China – Digital Yuan (e-CNY): One of the most advanced CBDCs worldwide, the digital yuan is widely used in domestic transactions and is gaining traction in cross-border trade, particularly in Asia.
- India – Digital Rupee (e₹): Launched in two phases—wholesale in November 2022 and retail in December 2022—the digital rupee has seen strong adoption.
- Russia – Digital Ruble: Introduced in August 2023, the digital ruble functions alongside cash and non-cash rubles and is used for everyday transactions, including peer-to-peer transfers and payment for goods and services.
- Nigeria – eNaira: The eNaira aims to increase financial inclusion and streamline payments. While initial adoption was slow, momentum has since grown.
- Bahamas – Sand Dollar: The Bahamas became the first country to launch a CBDC in October 2020, using the Sand Dollar to support secure, efficient payments across its islands.
- Jamaica – JAM-DEX: Jamaica's CBDC, introduced to reduce transaction costs and boost financial inclusion, is available to the general public.
What Are CBDCs?
Central Bank Digital Currencies are digital versions of a country's sovereign currency, issued and regulated by central banks. Unlike cryptocurrencies, which are typically decentralized and volatile, CBDCs offer the efficiency and traceability of digital transactions while maintaining the trust and stability of fiat money. All CBDC transactions are recorded on blockchain networks, making them traceable (and ensuring security and transparency) and reducing reliance on physical cash.
Inside the UAE's Digital Dirham
The UAE’s Digital Dirham is expected to be distributed through licensed banks, exchange houses, and fintech companies. It is designed to complement physical cash and existing electronic payment systems and will be accepted across all payment channels. In March 2025, the Central Bank of the UAE (CBUAE) unveiled a new symbol for the UAE Dirham, applicable to both its physical and digital forms.
Federal Decree-Law No. (54) of 2023 amending certain provisions of Federal Decree-Law No. (14) of 2018 concerning the Central Bank and Regulation of Financial Institutions and Activities establishes the Digital Dirham as legal tender, ensuring its acceptance across all payment platforms and outlets alongside traditional physical currency.
The definition of “Currency” means “The UAE official national currency in the form of paper notes, metal coins and digital currency and its unit is referred to as the “Dirham”.
Key features of the Digital Dirham include:
- Tokenisation: Enabling fractional ownership of assets, thus expanding access to financial markets and expanding liquidity to a wider group of market participants.
- Smart Contracts: Automating complex, multi-step transactions to improve operational efficiency.
- Enhanced Security: Leveraging blockchain’s encryption to prevent fraud and illicit use.
A potential benefit of digital currency is its ability to combat financial crime, as its encrypted blockchain ledger creates a transparent and traceable record of transactions, making it easier to detect and investigate illicit activities. Additionally, the government plans to introduce a national digital wallet system, through which users will be able to make domestic, wholesale, and international payments using the Digital Dirham.
Dirham backed Stablecoin: AE Coin
In addition to the launch of the Digital Dirham, the UAE is preparing to introduce AE Coin, the country's first fully regulated, dirham-backed stablecoin. In April 2025, International Holding Company (IHC), ADQ (the Abu Dhabi Sovereign Wealth Fund) and First Abu Dhabi Bank (FAB) announced plans to launch this new digital asset, which will be regulated by the CBUAE and issued by the UAE’s largest bank, FAB (subject to regulatory approval).
Unlike CBDCs, fiat-backed stablecoins are issued by private entities but pegged 1:1 to a traditional currency held in reserve. For every stablecoin issued, there must be an equivalent amount of fiat currency maintained in reserve.
AE Coin is designed to simplify both local and global payments and solidify the UAE’s position as a fintech leader. AE Coin will operate on the ADI blockchain, developed in the UAE by the ADI Foundation, which will provide a distribution network for blockchain payments.
ADI Foundation connects traditional financial systems with blockchain technology, supporting global financial access, especially for emerging markets. ADI Foundation already collaborates with over 20 governments worldwide.
Digital Dirham vs. Stablecoin
While both the Digital Dirham and AE Coin are digital representations of the Dirham, their origins differ:
- Digital Dirham: Issued by the state and holds legal tender status.
- AE Coin: A private initiative under regulatory oversight, not legal tender.
Together, the Digital Dirham and dirham-backed AE Coin mark a transformative step in modernizing the UAE’s financial landscape. These innovations promise to enhance payment systems, foster financial inclusion and reinforce the UAE’s status as a global leader in digital finance.
Should you require any information on the above, please contact Catriona McDevitt, Partner and Head of Banking & Finance.