March 16, 2023

UAE, India Agree on Teaming up on Cross-Border CBDC Transactions

UAE, India Agree on Teaming up on Cross-Border CBDC Transactions Featured Image

The Central Bank of the United Arab Emirates (UAE) and the Reserve Bank of India (RBI), the Indian central bank, inked a memorandum of understanding on cooperating on cross-border central bank digital currency (CBDC) transactions of remittances and trade, according to Bitcoin News.

In a statement by RBI, by enabling innovation in financial products and services, the agreement is predicted to enhance the efficiency of cross-border transactions, reduce costs, and bolster the economic ties between the UAE and India.

“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 CBUAE and RBI. CBUAE [UAE’s central bank digital currency] and RBI [Indian central bank digital currency] will jointly conduct proof-of-concept (PoC) and pilot(s) of bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade,” the statement read.

The Indian central bank underlined that the deal offers knowledge-sharing and technical collaboration on issues related to fintech and financial products and services.

Last year in November, India began its pilot phase for the digital rupee for the wholesale sector and the retail sector in December. According to February data from RBI, 50,000 users, and 5,000 merchants are using digital rupees. Earlier this month, RBI Executive Director Ajay Kumar Choudhary pointed out that the digital rupees would be an alternative to cryptocurrency.

The Central Bank Digital Currencies (CBDC)’s total value of payments is expected to grow 260,000% in the coming decade to record $213 billion annually by 2030, compared to $100 million in 2023, a new study revealed.

According to Juniper Research, the radical change will occur because of the increasing world governments’ adaption of the CBDCs to bolster financial inclusion and tighten control over how digital payments are made.

CBDC is a digital coin issued by a central bank and pegged to the country’s fiat currency. It is not a cryptocurrency, whose value is determined by market supply and demand.

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