India and UAE to Collaborate on Cross-Border CBDC Transactions

India and UAE to Collaborate on Cross-Border CBDC Transactions

The Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (UAE) have agreed to collaborate on cross-border central bank digital currency (CBDC) transactions for trade and remittances. The initiative is "expected to reduce costs, increase the efficiency of cross-border transactions, and further the economic ties between India and the UAE," explained the RBI.

India and UAE to Explore the Interoperability of CBDCs

The central bank of India, the Reserve Bank of India (RBI), announced on Wednesday a collaboration with the Central Bank of the United Arab Emirates to enhance the central bank digital currency (CBDC) transactions of both countries.

"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 to jointly enhance cooperation and enable innovation in financial products and services," the RBI described.

"Under the MoU, the two central banks will collaborate on various emerging areas of fintech, especially central bank digital currencies (CBDCs), and explore interoperability between the CBDCs of the CBUAE and RBI," the central bank of India said. Further elaborating:

"CBUAE and RBI will jointly conduct proof-of-concept (PoC) and pilot(s) of a bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade."

India began its digital rupee pilot in November last year for the wholesale sector and in December for the retail sector. RBI Executive Director Ajay Kumar Choudhary said earlier this month that the country’s CBDC will act as an alternative to cryptocurrency. 

Bilateral Engagement in Testing CBDC Uses

The MoU also provides for technical collaboration and knowledge sharing on matters related to fintech and financial products and services," the RBI concluded:

"This bilateral engagement in testing the cross-border use of CBDCs is expected to reduce costs, increase the efficiency of cross-border transactions, and further the economic ties between India and the UAE." 

In February, the RBI revealed that 50,000 users and 5,000 merchants are using digital rupees.

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