Top banks of India and the United Arab Emirates have signed an MoU to cooperate on central bank digital currency (CBDC) plans.
The two countries signed a Memorandum of Understanding (MoU) on 15 March in Abu Dhabi. Days before the announcement, India revealed its e-rupee usage figures.
Crypto Skeptic joins hands with Crypto Hub
The Reserve Bank of India (RBI) will test new technologies in a joint pilot with crypto hub UAE. Notably, the RBI has often opposed private cryptocurrencies while Dubai and Abu Dhabi compete to lead the sector.
According to the statement, the two countries will investigate CBDC interoperability between the Central Bank of the United Arab Emirates (CBUAE) and the RBI. It notes, “The CBUAE and the RBI will jointly conduct a proof-of-concept (PoC) and pilot of a bilateral CBDC bridge to facilitate cross-border CBDC transactions for remittance and trade.”
Meanwhile, the bilateral agreement is expected to reduce costs and improve the effectiveness of cross-border transactions. It also aims to strengthen economic ties between the two countries. Additionally, the MoU provides for technical cooperation and exchange of information on topics related to fintech and financial services.
India plans to take CBDC offline in crypto competition
India to launch first trial phase of retail e-rupee in December 2022. It was launched at four locations with the help of four banks. After about three months, the circulation of the digital rupee has now reached almost $500,000. Meanwhile, the entire CBDC has exceeded $15.2 million in circulation since its November launch.
In a written reply to Parliament, Finance Minister Nirmala Sitharaman said, “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 126.27 crores respectively.
RBI Executive Director, Ajay Kumar Choudhary recently said that CBDC will soon replace physical money as a means of trade and will require all its features including offline functionality. He added that these CBDCs would provide a digital form of currency to the people and serve as an alternative to cryptocurrencies.
The nation apparently intends to deactivate the private virtual currency in the interim. Meanwhile, the UAE government is actively supporting the use of these technologies, rapidly turning them into hubs of Web3. The Abu Dhabi Global Market (ADGM) has since introduced regulations for digital asset exchanges operating within its purview. Hence the country’s financial watchdog has provided more legal clarity and protection to this sector.
In February, the CBUAE also announced its goal to issue a CBDC for domestic and international payments. The scheme was part of its financial infrastructure transformation programme.
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