The Central Bank of the UAE published its Digital Dirham Policy Paper No. 1/2025 in July 2025, setting out the architecture and timeline for the country's retail central bank digital currency. The paper confirms a planned launch in the fourth quarter of 2025 and provides the most detailed public account to date of how the Digital Dirham will be structured, distributed and governed within the UAE's financial system.
The retail CBDC will operate under a two-tier intermediated model, meaning the central bank will issue the Digital Dirham to licensed intermediaries, who will then distribute it to end users. Banks, exchange houses and fintech companies have been identified as eligible distribution partners in the first tier below the central bank, an approach that leverages the existing financial infrastructure rather than requiring the CBUAE to build direct consumer-facing services from scratch.
NON-INTEREST-BEARING BY DESIGN TO PROMOTE PAYMENTS USE
The Digital Dirham will be non-interest-bearing, a deliberate design choice intended to encourage its use as a medium of exchange for everyday payments rather than as a store of value or investment instrument. Central banks internationally have grappled with the risk that a CBDC offering competitive returns could draw deposits away from commercial banks, potentially destabilising funding structures. By making the Digital Dirham yield-free, the CBUAE is signalling that financial stability considerations have shaped the instrument's fundamental characteristics.
The two-tier model similarly protects the role of commercial banks and licensed intermediaries within the financial system. Rather than allowing consumers to hold accounts directly at the central bank, all Digital Dirham holdings will be maintained through regulated intermediaries, preserving existing credit intermediation channels. This approach also places the customer due diligence and anti-money laundering obligations at the intermediary level, where established compliance infrastructure already exists.
The policy paper noted that the Digital Dirham has been designated as legal tender under the UAE's Central Bank Law, giving it the same status as physical currency for the settlement of debts and obligations within the country. This legal underpinning is a prerequisite for broad merchant and consumer acceptance and distinguishes the Digital Dirham from private digital currencies and stablecoins, which lack sovereign backing.
PROJECT MBRIDGE DEMONSTRATES CROSS-BORDER SETTLEMENT SPEED
Alongside the domestic retail programme, the CBUAE has been participating in Project mBridge, a multi-central-bank initiative developed in collaboration with the Bank for International Settlements, the Hong Kong Monetary Authority, the People's Bank of China and the Bank of Thailand. The project has executed its first government-to-government settlement using the Digital Dirham, compressing what previously took days into a transaction completed in seconds.
The cross-border dimension of the Digital Dirham programme underlines the CBUAE's ambition to use CBDC infrastructure not only to improve domestic payments but also to modernise the correspondent banking channels through which international trade and remittance flows are processed. The UAE's position as a regional trade and financial hub, with significant goods and services flows to Asia, Europe and Africa, gives cross-border efficiency improvements particular economic relevance.
The CBUAE will work with the identified intermediary partners in the months ahead to finalise technical integration requirements, onboarding procedures and consumer protection frameworks before the Q4 2025 launch date. The policy paper is the first in a planned series of documents the central bank said it would issue as implementation progresses, giving the market regular visibility of the regulatory and operational parameters governing the new instrument.