UAE Switches to Digital Dirham for China Payments, Sidelines US Dollar

• BRICS Members UAE and China Conduct First Transaction Using Digital Dirham
• Initiation of the Direct Trade Settlement
• The Historic Transaction
• The New Era of Digital Payments and the Threat to the US Dollar
• UAE's Drive Towards Digital Dirham
• Potential Impact on the US Dollar

BRICS Members UAE and China Conduct First Transaction Using Digital Dirham

On Monday, BRICS members, UAE and China executed their first-ever cross-border transaction using the newly introduced Digital Dirham, moving away from the traditional US dollar. This groundbreaking transaction, conducted directly to China from the UAE, marks a significant milestone in the usage of the new form of payment.

Initiation of the Direct Trade Settlement

The UAE initiated the direct trade settlement through the 'M Bridge' platform, marking a strategic move for BRICS to lessen their reliance on the US dollar through the implementation of digital methods. The Digital Dirham payment, initiated by the UAE Central Bank, amounted to Dh500 million, equating to approximately $136 million.

The Historic Transaction

Responsible for conducting the historic transaction to China was Shaikh Mansour, signaling the operational effectiveness of the 'M Bridge' payment platform. The live trade settlement was witnessed by officials from the UAE's Central Bank and a group of 1,056 graduating Emirati students.

The New Era of Digital Payments and the Threat to the US Dollar

The execution of this digital transaction flags the arrival of a new era of digital payments. The BRICS countries, UAE and China, have longstanding trade agreements worth billions of dollars, and their shift towards Digital Dirhams as a preferred method of payment could potentially destabilize the US dollar. The extent to which various sectors in the US could be affected if BRICS transitions away from the dollar for trade purposes remains to be seen.

UAE's Drive Towards Digital Dirham

The BRICS member, UAE, is exploring innovative methods to prioritize the Digital Dirham over the US dollar. Concurrently, China is advocating for developing nations to highlight their local currencies for trade settlements and to diminish their dependency on the US dollar. Further to this, the UAE's Central Bank recently launched the ‘Innovative Projects' scheme, intended to enhance the use of the Digital Dirham extensively.

Potential Impact on the US Dollar

These developments suggest the potential for reduced usage of the US dollar by BRICS for trade settlements in the future. The impact of this shift could be profound, influencing the US economy and potentially disrupting the global supply and demand mechanism of the dollar.

Edited by Jonathan Stoker