India and UAE To Test CBDC Interoperability

• RBI and UAE signed the MoU for the development of CBDC.
• Reportedly, 50,000 users and 5000 merchants started using digital currency.

India’s central bank, the Reserve Bank of India (RBI), announced its partnering with the Central Bank of UAE (CBUAE). This collaboration enhances both countries’ Central Bank Digital Currency (CBDC) transactions of remittances and trade. Both the central banks signed the Memorandum of Understanding (MoU) on Wednesday in Abu Dhabi to enhance cooperation and jointly enable innovation in financial products and services.

RBI stated: 

“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.”

The initiative is to increase the efficiency of cross-border transactions, expected to reduce costs and further the economic ties between India and UAE, as per RBI. According to the announcement, the banks will also conduct the Proof of Concepts and the pilots of bilateral CBDC to facilitate cross-border CBDC transactions of remittances and trade.

CBDC as an Alternative to Cryptocurrency

India started its digital rupee pilot last year in November for the wholesale sectors, and in December for the retail sectors. RBI revealed that they are testing retail CBDC in 15 cities reaching more than 50,000 users and 5000 merchants using digital currency. The Bank’s executive director Ajay Kumar Choudry asserted that the country’s CBDC will act as an alternative to cryptocurrency.

In the MoU, the Indian bank highlighted the motto of this technical collaboration with the UAE. Also, it shared the findings on fintech and financial products and services. To highlight, both nations are set to jointly investigate the interoperability of their CBDCs.