UAE Central Bank refutes reports about digital currency issuance

The UAE central bank aims to be among the top 10 central banks in the world. Ryan Carter / The National

The Central Bank of the UAE on Monday refuted reports that it plans to issue a digital currency as part of its 2023-2026 strategy, a spokeswoman confirmed to The National.

The clarification came after reports had emerged that the regulator was planning to issue a digital currency.

The UAE Central Bank has yet to accept or acknowledge crypto or digital assets as a legal tender in the UAE. The only legal tender in the country is the UAE dirham.

"All major news about the Central Bank of the UAE will communicated through our official channels," a spokeswoman told The National.

Central banks across the world have been seeking to develop digital currencies.

Central Bank Digital Currencies, or CBDCs as they are known, are different from cryptocurrencies such as Bitcoin, which have experienced wild swings in pricing in recent months.

The CBUAE and the Saudi Central Bank have completed a proof-of-concept project on a wholesale central bank digital currency "to settle domestic and cross-border transactions using central bank money on a distributed ledger technology", the regulators said in February.

The UAE Central Bank has also joined the second phase of a multiple digital currency project called m-CBDC Bridge for cross-border payments initiated by the Hong Kong Monetary Authority and the Bank of Thailand, it said at the time.

CBDCs have the potential to be the real disruptor of the financial world, as opposed to cryptocurrencies that are merely a tool for speculative investment, S&P Global Ratings said in June.

“The price of a cryptocurrency is volatile and it can go down, but what cannot go down is the price of a CBDC,” Mohamed Damak, a senior director at S&P Global Ratings, said, noting that CBDCs will help build “trust across the ecosystem” but their development will "still take some time".

In April, the Bank of Japan said it would begin a series of experiments for a digital yen and the UK Treasury and Bank of England said they would establish a task force to develop a "Britcoin".

US Federal Reserve chairman Jerome Powell said in May that the Fed plans to publish a discussion paper this summer, which will outline its current thinking on digital payments.

G7 finance ministers and central bank governors have also pledged to work together on CBDCs to develop an understanding "on their wider public policy implications".