The Central Bank of the UAE (CBUAE) has enacted CB Law 2025, formally establishing the Digital Dirham as recognised legal tender throughout the country. The legislation moves the UAE's central bank digital currency from a pilot-stage initiative into the country's core legal monetary framework, placing the Emirates among a small number of jurisdictions globally to have codified CBDC status through primary legislation.
The Digital Dirham will operate through an indirect, two-tier distribution architecture: the CBUAE will manage the central ledger, maintaining ultimate authority over issuance, settlement and monetary policy transmission, while licensed commercial banks will be responsible for distributing the Digital Dirham to retail and corporate customers. The model is designed to preserve the existing intermediary role of banks within the payments system while anchoring the currency firmly within the CBUAE's balance sheet.
TWO-TIER MODEL KEEPS BANKS AT THE CENTRE
The two-tier architecture adopted under CB Law 2025 reflects a deliberate policy choice to avoid the disintermediation of the UAE's commercial banking sector that a direct, account-holding model would risk. Under the confirmed structure, customers access the Digital Dirham through their existing bank relationships rather than holding direct claims against the CBUAE, a configuration that limits the risk of large-scale deposit migration away from commercial banks and preserves the banks' function as the primary interface between monetary policy and the real economy.
Licensed banks distributing the Digital Dirham to customers will be required to meet operational and compliance standards set by the CBUAE, integrating the new currency into the existing regulated financial services environment. The central ledger managed by the CBUAE provides full wholesale-level visibility over issuance and settlement flows, enabling the regulator to monitor Digital Dirham circulation with a granularity that is not possible with physical cash.
A first government transaction using the Digital Dirham via the mBridge cross-border payment platform was completed in under two minutes, a result that demonstrates the currency's capacity for near-instant settlement in international corridors. The mBridge platform, developed collaboratively by several central banks, is designed to facilitate rapid and low-cost cross-border transactions using CBDC rails, and the UAE's completion of a live government-to-government transaction represents a significant operational proof point.
2027 TARGET SETS AMBITIOUS ADOPTION MILESTONE
CB Law 2025 sets out an ambition for the Digital Dirham to account for between 20% and 30% of domestic transactions by 2027. Reaching that share within two years would require substantial and rapid adoption across both retail payment channels and wholesale interbank settlement, a target that will depend critically on the pace at which licensed banks integrate the Digital Dirham into their customer-facing products and the degree to which merchants and consumers elect to use it in preference to existing payment methods.
The CBUAE has signalled that it will work closely with the banking sector to support the rollout and promote uptake as the Digital Dirham transitions from its new legal status to widespread commercial use. With the legislative foundation now in place, the focus shifts to the operational and commercial execution required to achieve the adoption targets embedded in the law, making the next twenty-four months a critical period for the UAE's CBDC programme.