In a landmark financial move, the United Arab Emirates (UAE) has successfully completed its first cross-border transfer using digital dirhams. This pivotal transaction, amounting to 50 million dirhams (about $13.6 million), was conducted on January 29 through the mBridge central bank digital currency (CBDC) platform, signifying a major step in digital banking.
The UAE Central Bank’s initiative, coinciding with its golden jubilee celebrations, saw this substantial sum transferred to China, showcasing the capabilities of the innovative mBridge platform. Developed in 2021 through a collaboration between the monetary authorities of China, Hong Kong, Thailand, and the UAE, along with the Bank for International Settlement (BIS), mBridge stands as the only international project of its kind involving China.
This platform, which completed its first pilot in September 2022, is revolutionizing the way financial transactions are conducted. It integrates multiple commercial banks from each member country, enhancing the infrastructure and technological capabilities for seamless financial exchanges. The mBridge ledger leverages a single-platform, direct-access framework, enabling real-time, peer-to-peer transactions with the HotStuff+ consensus mechanism. This advancement allows for quicker transfers of national digital currencies among participating countries.
The project has not only attracted global attention but also some concerns. U.S. Congress member Representative Maxine Waters, a member of the House Financial Services Committee, has expressed worries about mBridge’s potential for circumventing economic sanctions.
The rise of blockchain technology and digital currencies has spurred governments worldwide to explore national digital currencies issued by central banks. According to a Bank for International Settlements report, nearly 90% of global central banks are now considering adopting CBDCs, with 11 countries already launching their own, 15 in the pilot stage, and 26 in the development phase, as per the Atlantic Council’s CBDC tracker. This move by the UAE represents a significant step forward in the global shift towards digital currency integration in banking systems.