The Digital Dirham is poised to become a digital equivalent of the physical UAE Dirham, backed by the UAE Central Bank and recognized as legal tender. It will coexist with cash and bank deposits, offering a secure, state-guaranteed form of digital money for use by consumers, businesses, and government entities.
Legal Status and Policy Framework
The UAE has established a clear statutory basis for the Digital Dirham to be treated as official money. In October 2023, Federal Decree–Law No. 54 of 2023 amended the central bank law (Federal Law No. 14 of 2018) to include digital currency within the definition of “currency,” confirming that a Central Bank–issued Digital Dirham can function as legal tender. This was reinforced by Federal Decree–Law No. 6 of 2025, which placed the Digital Dirham on the same footing as physical cash and defined the Dirham as comprising “notes, coins and digital forms,” giving the CBUAE an express mandate to issue and regulate it.
Under these laws, the Central Bank’s Board of Directors is responsible for issuing detailed implementing regulations. These will govern how the Digital Dirham is issued, distributed, redeemed at face value, and transferred, as well as the wallet rules and technical standards needed for day-to-day use. Until then, the framework confirms the Digital Dirham’s legal validity while leaving operational requirements to Central Bank regulation.
Beyond creating the Digital Dirham itself, the UAE has broadened the Central Bank’s oversight of digital payments more generally. Federal Decree–Law No. 6 of 2025 provides that payment-related activities involving digital assets are subject to Central Bank licensing and regulation, reinforcing supervision of the wider digital payments ecosystem to support financial stability and consumer protection.
Implementation Strategy and Phased Roll-out
The Central Bank of the UAE is pursuing a controlled, phased roll-out of the Digital Dirham under its Financial Infrastructure Transformation (FIT) programme. Following years of research and pilots, the CBUAE has indicated the CBDC is ready and will be launched in stages “very soon.” The first phase targets select digital-economy use cases and will be free for individuals and small businesses to drive early adoption, with later phases expected to expand functionality, including wider commercial and cross-border applications.
Design and Distribution
The Digital Dirham is expected to be deployed through an intermediated, two-tier distribution model. Under this structure, the CBUAE will remain the sole issuer, while licensed financial institutions—including banks and regulated payment providers—will distribute the Digital Dirham and provide the regulated access layer for end users. Individuals and corporates would access and transact through wallets and customer interfaces operated by these intermediaries, mirroring the established channels through which cash enters circulation under supervisory oversight.
The CBUAE has developed a dedicated issuance platform and wallet infrastructure to support conversion between cash/bank deposits and Digital Dirhams and to enable immediate payments. The Digital Dirham is non-interest-bearing and remains fully fungible with the conventional Dirham on a 1:1 basis.
The system operates on a permissioned distributed ledger within the Central Bank’s authorized ecosystem, enabling controlled participation, enforceable rules, and strong security and resilience. It supports instant, atomic settlement, reducing settlement lag and related credit or counterparty exposure while enabling new regulated payment use cases.
Pilot Successes
The UAE has already tested key aspects of the Digital Dirham in controlled pilots. The Central Bank has been studying CBDCs since at least 2019, participating in projects like Project Aber (a 2019 UAE–Saudi Arabia joint experiment on a dual-issued digital currency for banks) and Project mBridge (a 2022 multi-country pilot for cross-border CBDC transfers). A major milestone occurred in January 2024, when the CBUAE issued the first batch of Digital Dirhams as legal tender on its new platform and successfully executed a cross-border payment to China using the mBridge network.
More recently, in November 2025, the first government financial transaction using Digital Dirham was completed: the UAE Ministry of Finance and Dubai Department of Finance jointly carried out a payment using Digital Dirhams in under two minutes. This pilot government transaction underscores the system’s efficiency and the public sector’s readiness to adopt the new currency.
AML/CFT Compliance and Transparency Benefits
A key objective of the Digital Dirham is to strengthen AML/CFT compliance. As a CBDC, it provides greater transaction traceability than cash, supporting the detection and deterrence of financial crime. The CBUAE’s framework notes that the Digital Dirham will facilitate more secure AML/CFT- and KYC-compliant transactions and help prevent illicit finance. Transactions are recorded on an authorized ledger, creating an auditable trail that can be reviewed, subject to applicable legal process, for suspicious patterns—while still maintaining appropriate safeguards for user privacy.
The Digital Dirham also adopts a privacy-by-design approach while enabling regulatory monitoring. Personal identifying information is not stored on the ledger; users transact via pseudonymous identifiers, with sensitive customer data held off-ledger by licensed wallet providers. Those regulated intermediaries remain responsible for KYC due diligence and record-keeping, consistent with existing obligations for bank accounts and payment services.
Outlook
Looking ahead, the Digital Dirham is intended to extend beyond domestic use, with cross-border functionality and financial inclusion among the stated objectives. The Central Bank has indicated that tourists may be able to fund a Digital Dirham wallet using their home currency, spend locally, and reconvert any remaining balance upon departure—reducing friction and cost in everyday foreign-exchange use.
As implementing regulations are issued and the first phase goes live, residents and businesses will begin adopting the Digital Dirham through regulated channels. Policymakers have framed the initiative as both enabling and controlled: supporting faster payments, innovation, and connectivity while managing risk through legal governance and technical safeguards. For the public, it offers digital convenience backed by sovereign credit, positioning the Digital Dirham as a credible pillar of the UAE’s modern payments ecosystem.
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