The Reserve Bank of India (RBI) has partnered with the Central Bank of the United Arab Emirates (UAE) by signing a Memorandum of Understanding (MoU) to collaborate on central bank digital currency (CBDC) transactions involving remittances and trade across borders. On Wednesday, the RBI disclosed this collaboration, which is expected to decrease expenses, enhance the efficiency of cross-border transactions, and reinforce economic connections between India and the UAE.
MoU for Innovation in Financial Products and Services
Under the MoU, the RBI and the CBUAE will jointly enable innovation in financial products and services and collaborate on various emerging areas of fintech, particularly CBDCs. The two central banks will explore interoperability between their respective CBDCs and conduct proof-of-concept (PoC) and pilot projects for a bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade.
India’s Digital Rupee Pilot
India launched its digital rupee trial in November 2022 for the wholesale industry and in December for the retail industry. According to the RBI Executive Director Ajay Kumar Choudhary, the country’s CBDC will serve as a substitute for cryptocurrency, which he announced earlier this month.
Technical Collaboration and Knowledge Sharing
In addition to exploring cross-border use cases of CBDCs, the MoU facilitates technical cooperation and knowledge exchange concerning fintech and financial products and services. This joint effort is expected to boost cross-border transaction efficiency and reinforce the economic relationship between India and the UAE.
Digital Rupee Usage in India
As of February, 50,000 users and 5,000 merchants are using digital rupees in India. The CBDC usage is expected to increase with the collaboration between the RBI and the CBUAE on CBDC transactions.
The joint effort between India’s Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (UAE) in facilitating cross-border transactions of central bank digital currency (CBDC) through a Memorandum of Understanding is a significant milestone for both countries. The agreement will spur innovation in financial services and enable interoperability between the two nations’ CBDCs.
The expected outcomes include enhancing the efficiency of cross-border transactions, reducing costs, and fostering economic ties between the two countries. Since India has already begun piloting its digital rupee, this collaboration is anticipated to accelerate CBDC adoption in the region. Overall, this collaboration is a promising step forward in advancing the future of digital currencies and cross-border transactions.
