In a notable move reshaping the global economic landscape, the United Arab Emirates (UAE), a member of the BRICS alliance, has recently undertaken a significant shift in its international trade transactions. Departing from the traditional reliance on the US dollar, the UAE has opted to pay its dues to China using its newly introduced Digital Dirham, a digital version of its national currency.
This strategic move not only marks a departure from the established norm of denominating global transactions in the US dollar but also underscores the evolving dynamics within the BRICS coalition.
UAE Digital Dirham cross-border payment is a first
Sheikh Mansour Bin Zayed Al Nahyan, Vice President, Deputy Prime Minister, Chairman of the Presidential Court, and Chairman of the Board of the Central Bank of the UAE, made history on Monday by initiating the first cross-border payment of Dh50 million using the UAE Central Bank’s digital currency, ‘Digital Dirham’.
Sheikh Mansour made the historic transaction directly to China through the ‘mBridge’ platform while attending the ‘Golden Jubilee’ celebration of the Central Bank’s establishment and the graduation of 1,056 Emiratis from the first batch of the ‘Ethraa Emiratisation’ program at the Abu Dhabi National Exhibition Centre.
Project mBridge was launched in 2021 by the central monetary authorities of China, Hong Kong, Thailand, and the UAE in collaboration with the Bank for International Settlement (BIS). It is the only international collaborative partnership that includes China. The project finished its first pilot in Sept 2022.
One member of the United States Congress also noted mBridge’s advancements – Representative Maxine Waters, a member of the House Financial Services Committee, expressed concern that the initiative could be used as a cover for evading economic sanctions.
In addition, Sheikh Mansour underscored the Central Banks’ responsibility to promote economic growth to support development initiatives in the country. According to him, this should be achieved by ensuring financial and monetary stability, as well as enhancing the efficiency and adaptability of the financial system.
The end goal of these developments is to strengthen the UAE’s position as a global financial center. He further emphasized the leadership’s strategic dedication to this objective.
UAE commits to empowering its citizens to financial freedom
Additionally, Sheikh Mansour emphasized the commitment of the leadership to empowering Emirati citizens and cultivating their expertise in various domains of expertise and professional practice.
He added that this commitment is designed to supply the financial sector with exceptionally skilled domestic personnel in accordance with the most stringent global criteria and to contribute to the nation’s broader cultural and developmental renaissance.
Sheikh Mansour extended his sincere congratulations to the esteemed graduates of the first cohort of the Ethraa program, the staff of the Central Bank, and the Emirates Institute of Finance and wished them the utmost success in their endeavors to serve their nation and contribute to its ongoing advancement.
On this occasion, the subsidiaries of the Central Bank erected the ‘Innovative Projects’ Pavilion, where the Vice President was briefed on the exhibits.
Additionally, he observed the establishment of Al Etihad Payments, a venture that manages the local payment card system, through the execution of the initial effective financial transaction using a payment card featuring unique attributes.
Additionally, the services offered by the Aani immediate payment platform, which was introduced by Al Etihad Payments in October 2023, and the supervisory technology project ‘Suptech’ were explained to Sheikh Mansour.
The collapse of the United States Dollar
The BRICS countries, the UAE and China, have billion-dollar trade deals, and using Digital Dirhams as payment jeopardizes the US dollar. If the two BRICS countries continue to pay in Digital Dirhams, the US dollar will be affected most severely.
The UAE, a new BRICS member, is looking for innovative ways to propel the Digital Dirham ahead of the US currency. Furthermore, China encourages developing countries to prioritize their indigenous currencies in trade settlements above the US dollar.
The Digital Dirham is the United Arab Emirates’ central bank digital currency (CBDC), launched as part of the Central Bank Digital Currency Strategy. It involves wholesale and retail CBDC issuance, aiming to enhance domestic and cross-border payments, promote financial inclusion, and transition towards a cashless economy.
