Today the Central Bank of the UAE announced that R3 is its technology provider for its central bank digital currency (CBDC) work, alongside G42 Cloud for infrastructure.
The three pillars of its first phase strategy have already been announced, with a plan to complete them within 12 to 15 months. First is Project MBridge, the wholesale cross border CBDC solution with the BIS and central banks of China, Hong Kong and Thailand, which aims to soft launch during that period. Given that MBridge uses a custom permissioned blockchain, we suspect R3 is not involved.
Second is the bilateral cross border CBDC project with India announced last week. And finally is the domestic initiative for both wholesale and retail CBDC with a proof of concept to be completed during the timeframe.
The central bank outlined the motivations as addressing pain points in domestic and cross border payments, with the delays and high costs of the latter much debated globally. The UAE has a massive migrant workforce, so remittance costs are a key issue.
Other drivers are:
- financial inclusion
- to support a cashless society
- resiliency and optionality in payment infrastructure
- to support tokenization of financial and non financial activities.
There was an emphasis on the tokenization motivation, which might be a key driver in the decision to partner with R3. With its Corda enterprise blockchain and relationships with many major banks, R3 has been involved in numerous tokenization initiatives. The SIX Digital Exchange (SDX), one of the first fully regulated digital security exchanges, is based on Corda, as is Marketnode, the tokenization joint venture between SGX and Temasek.
SDX and R3 were also involved in the cross border wholesale CBDC Project Jura involving the central banks of France and Switzerland.