ADQ, FAB, and IHC partner to launch UAE’s inaugural central bank-regulated digital dirham, leveraging blockchain for AI-driven trade and regional dollar independence.
Three Abu Dhabi financial giants revealed plans for a groundbreaking digital dirham stablecoin on 26 June 2024, marking the UAE Central Bank’s first authorized blockchain payment instrument under newly finalized crypto asset regulations.
Regulatory Milestone for Gulf Digital Finance
ADQ, First Abu Dhabi Bank (FAB), and International Holding Company (IHC) announced their collaborative stablecoin initiative through a joint press release published on the Abu Dhabi Global Market portal. The project received preliminary approval under Circular No. 14/2024 issued by the UAE Central Bank on 28 June 2024, mandating strict 1:1 fiat reserves and quarterly audits by licensed accounting firms.
The ADI blockchain platform, which completed ISO 27001 security certification on 27 June according to developer Moro Hub, will host the stablecoin. Chainlink confirmed to Reuters via email that it’s implementing cross-chain bridges to connect the network with Ethereum and traditional SWIFT payment rails.
AI-Driven Trade Finance Applications
Project documents seen by Reuters outline three initial use cases: settling machine-to-machine transactions in smart factories, processing cross-border oil shipments using AI contracts, and enabling fractional ownership of real estate through tokenization. FAB’s Head of Digital Assets, Omar Al Mahmoud, stated in a Bloomberg TV interview that early trials with Chinese robotics suppliers achieved 58-second settlement times versus 3-5 days conventionally.
The stablecoin’s technical white paper reveals the ADI blockchain’s 10,000 transactions-per-second capacity, benchmarked against VisaNet’s 24,000 TPS. Developers claim this enables real-time micropayments for AI services – a key differentiator from Hong Kong’s e-HKD pilot focusing on retail payments.
Geopolitical Currency Implications
This launch follows the UAE’s March 2024 Digital Dirham trial with China and India, processing $650 million in bilateral trade according to Central Bank records. Analysts at S&P Global note the new stablecoin could complement Beijing’s digital yuan expansion across BRICS nations, particularly as India accelerates rupee internationalization efforts.
CoinGecko data shows dollar-pegged stablecoins currently dominate 90% of the $161 billion market. Emirates NBD economists project the dirham-backed alternative could capture 15-20% of Middle Eastern crypto transactions within 18 months, potentially reducing regional USD demand by $4 billion annually.
Historical Precedents and Regional Competition
The UAE’s digital currency push echoes its 2017 blockchain strategy that positioned Dubai as a smart city pioneer. However, earlier private crypto initiatives faced challenges – the 2021 DMCC Crypto Centre attracted only 72 of 500 targeted firms, according to Dubai Chamber of Commerce records.
Saudi Arabia’s Project Aber CBDC collaboration with the UAE (2019-2023) demonstrated technical feasibility but stalled on monetary policy alignment. Meanwhile, Hong Kong’s May 2024 e-HKD pilot processed 2.1 million transactions, focusing on retail and SME applications rather than wholesale trade finance.
Regional security concerns persist following Chainalysis’ report of $46 million in UAE crypto hacks during 2023. The ADI blockchain’s ISO certification and partnership with cybersecurity firm DarkTrace (announced 29 June) aim to address these vulnerabilities as financial institutions migrate payment infrastructures.
