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In a significant milestone, the United Arab Emirates (UAE) has executed its inaugural cross-border payment utilizing the Digital Dirham. The transaction, amounting to AED50 million (USD13.6 million), was transmitted by Sheikh Mansour bin Zayed Al Nahyan, Chairman of the Board of the Central Bank of the UAE, to China.

This historic financial exchange was facilitated through the ‘mBridge’ platform, a collaborative initiative involving the BIS Innovation Hub, and four founding central banks— including the Hong Kong Monetary Authority, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People's Bank of China, and the Bank of Thailand— along with more than 25 observing members.

Also Read: Blockchain and Banking: A Blessing or a Curse?

Revolutionizing Wholesale Cross-Border Payments

The ‘mBridge’ project aims to revolutionize wholesale cross-border payments through a multi-Central Bank Digital Currency (multi-CBDC) common platform, underpinned by distributed ledger technology (DLT). The initiative seeks to tackle prevalent inefficiencies such as high costs, slow processing times, lack of transparency, and operational complexities. Additionally, it prioritizes the preservation of currency sovereignty and ensures monetary and financial stability for each participating jurisdiction.

This collaborative effort responds to the pressing need for modernization in cross-border transactions, addressing the evolving landscape by leveraging the capabilities of DLT.

Also Read: Embracing the Massive Fintech Wave

The Coexistence and Feasibility of Traditional and Modern Currencies

PwC analysts foresee a future where various forms of money— including CBDCs, stablecoins, and cryptocurrencies— coexist alongside traditional digital and physical currencies.

The coexistence of CBDCs, stablecoins, cryptocurrencies, and traditional currencies is feasible due to their diverse use cases and complementary functions within the financial ecosystem. Regulatory frameworks are evolving to accommodate these emerging forms of money while ensuring consumer protection and financial stability. Technological innovations, particularly blockchain and distributed ledger technology (DLT), facilitate interoperability between different forms of money, enabling seamless exchange and transfer across various platforms and networks. Overall, this multi-faceted approach to money promotes financial inclusion, innovation, and efficiency within the global economy.

This groundbreaking transaction signifies a leap forward in the pursuit of a more efficient and transparent global financial system.

Also Read: Should Digital Currencies be Regulated?

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