UAE Joins Global CBDC Race with Digital Dirham Launch – Here’s Why It Matters

The UAE just fired its opening shot in the central bank digital currency arms race—and traditional banks might want to start sweating.

Sandstorms Meet Blockchain

Abu Dhabi's Central Bank flipped the switch on the 'Digital Dirham' this week, positioning the Emirates as the latest heavyweight to enter the CBDC arena. No test phases, no timid pilot programs—just a live sovereign digital currency hitting the financial ecosystem at full throttle.

Why This Isn’t Just Petrodollar 2.0

Unlike oil-backed legacy systems, the Digital Dirham runs on a purpose-built blockchain infrastructure. Early reports suggest instant cross-border settlement capabilities—a direct challenge to SWIFT’s creaking monopoly. Local banks now face the uncomfortable choice: adapt to on-chain treasury operations or risk becoming expensive middlemen.

The Cynic’s Corner

Of course, no government-backed digital currency launch would be complete without the usual chorus of ‘financial inclusion’ promises. Never mind that the same institutions freezing accounts during last year’s market crash now want you to trust their blockchain permissions.

The dirham’s digital debut proves one thing: when nation-states smell disruptive potential, they’ll co-opt the technology faster than a VC funds a meme coin.

UAE Gov’t Transaction Marks Test

According to government and industry reports, the transfer was carried out by the Central Bank of the UAE alongside the Ministry of Finance and the Dubai Department of Finance.

The payment used the mBridge platform, a system designed to link multiple central bank digital currencies. The MOVE was limited to federal and Dubai entities, not to banks or the general public.

Reports have disclosed that the transaction was handled end-to-end in under two minutes, a speed that officials highlighted as proof of technical readiness.

Today, Ministry of Finance & Dubai Finance marked a pivotal milestone in the history of government financial transformation in the UAE, as we executed the first government transaction using the Digital Dirham issued by the Central Bank of the UAE, representing the future of the… pic.twitter.com/gYRiTC1Euh

— Maktoum Bin Mohammed (@MaktoumMohammed) November 11, 2025

Built On A Multi-Central Bank Network

Based on reports, mBridge was chosen because it can connect several central banks and support cross-border settlement. The UAE’s choice signals an intent to test interoperability, not just a domestic ledger.

Some experts say this model could make it easier for central banks to settle with each other without routing everything through correspondent banks. A small test does not mean mass rollout. But the system was tested in a live setting, which moves it past lab trials and into operational territory, according to reports.

The pilot right now is narrow. It focused on payment FLOW between government accounts and on how settlements are recorded. Transaction monitoring, privacy safeguards, and operational controls were part of the checks.

Based on reports, authorities also monitored speed, finality, and system stability. No retail wallets or merchants were involved in this stage. The pilot was described as one step in a staged plan that will expand if the tests meet the central bank’s benchmarks.

According to public statements and media coverage, the Central Bank has indicated a phased approach toward broader use, with some earlier timelines pointing to a possible wider launch in Q4 2025.

If the authorities move forward, future phases could involve private banks, merchant acceptance, and consumer wallets. But regulators will need to resolve questions about privacy, cybersecurity, and how a CBDC will sit alongside existing bank deposits.

Decisions on these issues are likely to shape how quickly the program moves beyond government transfers.

Featured image from Manara Magazine, chart from TradingView