November 18, 2025 | Dubai, UAE: The United Arab Emirates’ payment in digital currency has achieved a groundbreaking milestone in financial innovation with the formal recognition of the Digital Dirham as legal tender, placing payment in digital currency on equal footing with traditional cash.
The 2025 Federal Decree Law No. 6 has revamped the definition of the national currency to encompass notes, coins, and digital forms, and this is a breakthrough in the world of finance in the region.
This historic legislation confirms that payment in digital currency through Digital Dirhams can be used for “payment of any amount” without legal obstacles. The Emirates now has a definitive statutory foundation to its digital currency programme, which makes the Central Bank of the UAE (CBUAE) one of the first central banks the adopt central bank digital currency (CBDC).
To Salaries to Shopping: The Future of Digital Payments
Legal experts confirm that payment in digital currency for salaries, retail purchases, and remittances is now legally permissible. According to Ali Awad, the Partner at Al Tamimi & Company, it would not be possible for have merchant or financial institution to decline Digital Dirhams as a means of paying for goods or services once the regulations of implementation are in place.
The implications for payment in digital currency are far-reaching. The Digital Dirham, in contrast to the physical cash, facilitates programmable payments, instant settlement and cross-border transfer without any hitches. The potential benefits of such a technological advancement include ease in the payment systems because of the lowered cost of transactions, as well as instant settlement of retail, wholesale, and foreign transactions.
Government Takes the Lead in Digital Transactions
Demonstrating confidence in payment in digital currency, the Ministry of Finance and Dubai’s Department of Finance completed the UAE’s first government financial transaction using the Digital Dirham. This was a pilot stage of the digital payment deployment to speed up the digital payment penetration in the country.
The Digital Dirham uses a hybrid system of an account-based and token-based system. This infrastructure ensures that payment in digital currency maintains the security and trust associated with traditional central bank-backed money while offering enhanced functionality.
The Watershed Moment of Digital Finance
While payment in digital currency is now legally recognised, detailed implementation regulations by the CBUAE Board of Directors are still pending. These laws will oversee the issuance, circulation, and legal transfer of the digital currency. Financial institutions should be ready to undergo drastic transformations in the management of liquidity and treatment by the regulators.
For individuals, payment in digital currency could broaden financial inclusion by giving unbanked or underbanked populations easier access to formal financial services. The recognition of payment in digital currency through the Digital Dirham represents more than technological advancement–it reflects the UAE’s commitment to remaining at the forefront of financial innovation.
The legislation is also part of a broader regulatory overhaul that centralises regulation by the Central Bank, with new and more effective enforcement mechanisms. This comprehensive approach ensures that the transition to widespread payment in digital currency occurs within a robust regulatory framework that protects all stakeholders while positioning the UAE as a global leader in digital finance.
Read: Enforcing Traffic Discipline and Pedestrian Safety: UAE traffic fines and Stricter Penalties.
