UAE Executes First Transaction with Digital Dirham in CBDC Pilot Program
The United Arab Emirates has successfully conducted its inaugural transaction using the newly developed central bank digital currency (CBDC), marking a significant milestone in the nation’s journey toward digital financial innovation. The Digital Dirham, as it’s known, was used in a trial operation facilitated through the mBridge platform—an international initiative aimed at enhancing cross-border payments through blockchain-based solutions.
According to the UAE’s Ministry of Finance and Dubai’s Department of Finance, the transaction was completed in less than two minutes, demonstrating both speed and technical efficiency. Officials described the event as a foundational step toward broader integration of the digital currency into governmental and commercial financial systems.
The test was part of the ongoing pilot phase of the Digital Dirham project, which was first publicized in March. This marks the first major development since the Central Bank of the UAE announced that the CBDC’s full-scale deployment is anticipated to begin in the final quarter of 2025.
Ahmed Ali Meftah, Executive Director of Central Accounts at Dubai Finance, emphasized that the purpose of the trial was to assess the system’s operational readiness and ensure compatibility with existing central banking infrastructure. He noted that seamless integration between the CBDC system and current financial platforms is essential for a smooth transition into everyday use.
The UAE Central Bank released a policy document in July, outlining the strategic vision behind the CBDC initiative. The document describes the Digital Dirham as a tool to modernize the country’s monetary framework and adapt to the rapidly evolving landscape of digital finance. Highlighting the need to future-proof national currencies, the central bank sees CBDCs as a response to shifting consumer preferences and technological advancements.
The rollout of the Digital Dirham is planned to occur in multiple phases, with its initial functionality limited to basic payment services. This cautious approach is intended to avoid disrupting existing financial products such as savings accounts and interest-bearing instruments.
Globally, the concept of CBDCs remains a topic of debate. Supporters argue that digital currencies issued by central banks can streamline payment systems, improve cross-border transaction efficiency, and increase financial inclusion, particularly for the unbanked. Critics, however, warn of potential risks, including privacy concerns and the possibility of destabilizing traditional commercial banking by giving consumers direct access to central bank accounts.
Despite widespread interest, only three countries—Nigeria, the Bahamas, and Jamaica—have officially launched a CBDC. Data from the Atlantic Council’s CBDC tracker indicates that 49 other nations are currently in the pilot phase, exploring the practicalities and implications of introducing a sovereign digital currency.
The UAE’s engagement with the mBridge platform is particularly noteworthy. Developed in collaboration with the Bank for International Settlements (BIS) and several other central banks, mBridge aims to address inefficiencies in international payments by leveraging distributed ledger technology (DLT). The UAE’s participation underscores its commitment to not only modernizing its domestic financial system but also contributing to global advancements in digital finance.
Looking ahead, the UAE’s phased CBDC rollout strategy will likely include integration with various government services, including tax collection, welfare disbursements, and public procurement. Furthermore, the private sector is expected to play a key role in testing and adopting the Digital Dirham, particularly in industries with high transaction volumes such as retail, e-commerce, and logistics.
Experts believe the success of the Digital Dirham project could position the UAE as a regional leader in financial digitization. The country’s proactive regulatory stance and investments in blockchain infrastructure have already made it a hub for fintech innovation.
Additionally, the introduction of a CBDC could enhance monetary policy tools, allowing the central bank to implement more targeted and efficient interventions. For example, programmable money could be used to release stimulus funds directly to citizens or businesses under specific conditions, improving both speed and accountability.
The UAE’s move also aligns with broader geopolitical and economic goals. By reducing reliance on traditional cross-border payment systems, the country can mitigate risks associated with currency volatility and geopolitical tensions. A successful CBDC could also support the UAE’s ambitions to become a global center for digital finance, attracting investment and talent from around the world.
As the pilot phase continues, further testing is expected to include interoperability trials with other national CBDCs, stress testing under high transaction volumes, and security audits to ensure resilience against cyber threats. Public awareness campaigns and stakeholder consultations will also be crucial to build trust and understanding among citizens and businesses.
In sum, the UAE’s first successful Digital Dirham transaction marks more than just a technical achievement—it represents a pivotal step in the nation’s transition toward a fully digital economy. With a clear roadmap, robust infrastructure, and international collaboration, the UAE is laying the groundwork for a future where digital currencies play a central role in both domestic and global financial systems.