The apex banks of India and the UAE have signed an MoU to collaborate on central bank digital currency (CBDC) plans.
The two nations inked the Memorandum of Understanding (MoU) on March 15 in Abu Dhabi. Days before the announcement, India revealed figures on the usage of its e-rupee.
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The Reserve Bank of India (RBI) will test new technologies in a joint pilot with Crypto Hub UAE. Notably, RBI has frequently opposed private cryptocurrencies while Dubai and Abu Dhabi compete to lead the sector.
According to the statement, the two countries will examine CBDC interoperability between the Central Bank of the United Arab Emirates (CBUAE) and RBI. It notes, “CBUAE and RBI will jointly conduct proof-of-concept (PoC) and pilot(s) of bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade.”
Meanwhile, the bilateral agreement is anticipated to lower costs and improve the effectiveness of cross-border transactions. It also aims to strengthen the economic links between the two countries. Additionally, technical cooperation and information exchange on topics pertaining to Fintech and financial services are provided in the MoU.
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India launched the retail e-rupee’s first trial phase in December 2022. With the help of four banks, it was launched in four locations. After almost three months, the digital rupees circulation is now valued at roughly $500,000. Meanwhile, after the November launch of a whole CBDC, the circulation has surpassed $15.2 million.
Finance Minister Nirmala Sitharaman said in a written reply in the Parliament, “As on February 28, 2023, the total digital rupee – Retail (e₹-R) and digital rupee – wholesale (e₹-W) in circulation is Rs 4.14 crore and Rs 126.27 crore, respectively.”
The executive director of the RBI, Ajay Kumar Choudhary, recently stated that CBDCs would soon replace physical money as a means of trade and would need to have all of its characteristics, including offline functionality. He added that these CBDCs would provide people with a digital form of currency and would serve as an option for cryptocurrencies.
The nation apparently intends to deactivate private virtual currency in the interim. Meanwhile, the UAE government is actively supporting the use of these technologies, increasingly turning them into a hub for web3. The Abu Dhabi Global Market (ADGM) has since introduced regulations for digital asset exchanges operating within its purview. The nation’s financial watchdog has therefore provided more legal clarity and protection to the sector.
In February, CBUAE also announced its aim to issue a CBDC for domestic and international payments. The plan was part of its Financial Infrastructure Transformation Programme.
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