Key Takeaways:
- The Central Bank of the United Arab Emirates (UAE) and the Reserve Bank of India (RBI) have decided to work together on cross-border central bank digital currency (CBDC) transactions for commerce and remittances.
- The CBUAE and RBI will work together to perform proof-of-concept (PoC) and pilot(s) of the bilateral CBDC bridge.
A deal to improve collaboration in a number of areas, including looking into the interoperability of central bank digital currencies, was signed by the RBI and the central bank of the UAE on Wednesday (CBDC).
The Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (CBUAE) signed a Memorandum of Understanding (MoU) in Abu Dhabi on Wednesday to strengthen their partnership and collectively enable innovation in financial goods and services.
‘To enable cross-border CBDC transactions of remittances and trade, RBI and the Central Bank of the United Arab Emirates (CBUAE) will collaboratively perform proof-of-concept (PoC) and pilot(s) of bilateral CBDC bridge,’ RBI stated in a release.
It is significant to observe that, after the United States, The UAE is India’s second-largest source of inbound remittances from migrant workers.
RBI clearly stated: “The MoU also allows for technological cooperation and the exchange of knowledge on issues involving fintech and financial products and services.” This bilateral testing of CBDCs’ cross-border use case is anticipated to lower costs, improve the effectiveness of cross-border transactions, and strengthen India and UAE’s economic relations.
Given that the central banks have mentioned a bilateral bridge between the CBDCs of the two countries, it is ambiguous whether this will entail wholesale or retail CBDC trials.
India has advanced with wholesale and retail digital rupee experiments and pilots reasonably quickly since November 2022. Reliance Retail, India’s biggest retail chain, recently increased its support for the Digital Rupee.
Reliance Retail launched the first in-store adoption of the RBI-created and Blockchain-based Central Bank Digital Currency at its upscale grocery shop Freshpik (CBDC).
The UAE also has a plan in place with respect to CBDCs. The Central Bank of the United Arab Emirates unveiled a new plan in February to accelerate the financial services sector’s digital transformation, which includes open finance and a new digital currency. The initiative consists of nine projects in total, including the creation of a CBDC.
