United Arab Emirates: Central Bank Digital Currency introduced, paves the way for the recognition of digital currencies

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In brief

On 2 October 2023, the UAE issued Federal Law No. 54 of 2023, which amended Federal Law  No. 14 of 2018 on the Central Bank and the Organization of Financial Institutions and Financial Activities (the “Central Bank Law“) and changed the definition of currency to include a “National Digital Currency”. The amendment to the Central Bank Law was published in the Official Gazette on 31 October 2023. 


Article 57.4 of the Central Bank Law has been amended to entrust the Board of Directors of the Central Bank to issue the forms, designs and specifications of the National Digital Currency, including how it may be possessed and its advantages. 

Furthermore, Article 42 has been amended to include a provision allowing the Central Bank to keep other forms of monetary balances for digital currencies of any kind within the limits set by the Board of Directors.

With this development, the UAE would become one of the first countries in the world to formally recognize and introduce a Central Bank Digital Currency (CBDC) – an initiative it has been working on for more than two years now. 

There have been many discussions on the topic of CBDCs, including their advantages such as financial inclusion, transparency, the capability to combat money laundering, and the possibility for a jurisdiction to have its own monetary policy (i.e., the UAE does not have a monetary policy since its currency is pegged to the USD). However, a number of commentators have also decried the disadvantages of CBDCs, more particularly the lack of data privacy and security and the idea of potentially living in a dystopian world where every expense by an individual would be controlled by a governmental agency. Therefore, it would be important that strict data privacy controls are issued to accompany the relevant provisions of Article 57.4.

Furthermore, the question remains whether CBDCs could signal the end of crypto-currencies and a move to an even more centralized system when the whole point of blockchain and crypto-currencies is to have a more decentralized system and world where individuals would be more independent.

In this context, Article 157.2 of the amended Central Bank Law insists that virtual assets regulated in the various jurisdictions in the country may not be considered currencies. However, the Board of Directors can issue regulations to determine how virtual assets may be treated as means of payment or trade. Could we be seeing a convergence between the onshore regime (read our previous alert here) and the financial free zone regimes (read our alert on the DFSA framework here) in relation to the recognition or acceptance of crypto tokens and virtual assets?

To speak to us in relation to recognized Crypto Tokens, or any fintech and financial services regulatory matters or issues, please reach out to the Baker McKenzie contacts above.

For future updates, you can visit and subscribe to our Middle East Insights blog: me-insights.bakermckenzie.com/ 

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