The Central Bank has revealed its plan to implement the "digital dirham," a step that will completely alter the banking and currency industries.
Their annual report from the previous year states that there are a lot of advantages to this digital money over regular bank deposits.
Significant strides toward executing the digital currency strategy were made in 2023, according to the Central Bank's annual report. The Central Bank Law's revisions and the introduction of digital dirham as legal money are significant turning points. The first digital dirham was issued at this crucial moment, and the first cross-border payment transaction was started.
Characteristics of the Digital Dirham
The digital dirham, which is expected to be issued directly by the Central Bank, is being called a revolutionary kind of digital currency. Notably, it will be fully replaceable, meaning that cash and traditional bank deposits can be traded for it one-to-one. The study presents "Digital Dirham Sukuk" with denominations ranging from 5 to 1000 dirhams.
The Central Bank identifies four core advantages of the digital dirham. Firstly, it will serve as a sovereign digital currency endowed with encryption capabilities. Secondly, it will support the execution of smart contracts and programmable transactions, facilitating instant settlement between peers. Thirdly, it promises to enhance efficiency in retail and wholesale transactions as well as cross-border payments. Finally, its deployment is expected to bolster the nation's digital economy and promote financial inclusion.
It is projected that the adoption of the digital dirham will result in six main economic advantages. Increased GDP digitization and innovation, improved efficiency across multiple sectors, improved international trade relations, decreased transaction costs, increased flexibility and competition within the financial sector, and the reduction of risks related to cross-border payments and credit settlements are a few of these.
Central to its mission, the digital dirham aims to expedite the transition towards a fully digital economy. By supporting both retail and wholesale transactions and streamlining cross-border payments, it seeks to fortify the country's economic infrastructure. Moreover, it is designed to serve as a secure and cost-effective means of payment, thereby fostering global trade and serving as a reliable store of value.
Global Impact and Future Prospects
Globally, the idea of central bank digital currencies (CBDCs) is gaining ground as a solution to problems with both domestic and international payments. CBDCs have the potential to completely transform the global financial scene by removing obstacles to cross-border transactions and encouraging innovation in domestic payments.
The digital dirham's introduction by the Central Bank is a calculated step in the direction of modernizing the financial system. The digital dirham, with its capacity to boost productivity, encourage creativity, and fortify international economic connections, portends a bright future for virtual currencies and financial accessibility. It goes without saying that the impact of implementation on both domestic and foreign markets will be closely watched as it moves forward.
