The Reserve Bank of India (RBI) has partnered with the Central Bank of the United Arab Emirates (CBUAE) to further the development of central bank digital currencies (CBDCs) in their respective nations.
It has been reported that the two central banks have signed a Memorandum of Understanding (MoU) aimed at driving innovation in various financial products and services, especially CBDCs. Under the terms of the MoU, the RBI, and the CBUAE will be conducting trials on CBDC interoperability between their nations to reduce costs and strengthen the economic ties between India and the UAE via efficient cross-border transactions.
However, both central banks will “jointly conduct proof-of-concept (PoC) and pilot(s) of bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade.” Whether these CBDC pilots will involve a wholesale or retail program remains unknown.
The report said that last November, the Reserve Bank of India began the wholesale pilot program of its CBDC – the digital rupee. A month later, the Indian apex bank launched its first CBDC retail pilot, involving the participation of eight bank banks in four major cities.
Likewise, reporting on the progress of India’s CBDC research last month, the RBI announced that the digital rupee had been adopted by 50,000 users and 5,000 merchants, representing a remarkable milestone. Meanwhile, the UAE is also well-known for its strong interest in cryptocurrencies and CBDCs. As part of the gulf nation’s 2023-2026 economic strategy, preparations are underway by the CBUAE to roll out the nation’s CBDC, which has been under development for a while now.
The CBDC study in UAE only represents a part of the nation’s broader Financial Infrastructure Transformation (FIT) program, which includes other initiatives such as a card domestic scheme, a financial cloud, an instant payments platform, and so on. The concept of CBDCs keeps on gaining traction in the global economy, with many of the world’s central banks indicating strong interest, especially as they view this digital currency as an alternative to the “more volatile” cryptocurrency.
According to data from the Atlantic Council CBDC tracker, over 100 countries worldwide are currently in one stage of CDBC study or the other. Of course, these include first-world countries such as the United Kingdom, the United States of America, Russia, China, and even members of the European Union.
Thus, a major breakthrough in CBDC research was recorded recently, as the Bank of International Settlements (BIS) announced the successful results of “Icebreaker,” a CBDC aimed at testing the possibility of cross-border transactions between retail CBDC systems. This project involved the participation of the central banks of Israel, Norway, and Sweden.