On Wednesday, the authorities of India and the United Arab Emirates (UAE), collaboratively made an official announcement regarding the central bank digital currencies (CBDCs). The authorities of both nations have come together to take a major step toward CBDCs.
According to the press release, the Reserve Bank of India (RBI) and the Central Bank of United Arab Emirates (CBUAE) have sealed a deal to test cross-border transactions in CBDCs.
Reportedly, the banks have signed a memorandum of understanding (MoU) in Abu Dhabi which states that the central banks will jointly conduct a proof-of-concept (PoC) and pilot(s) of a bilateral CBDC. This move is intended to facilitate cross-border CBDC transactions of remittances and trade.
The press release briefs that the primary objective of the collaboration is to explore interoperability between the CBDCs of the two nations. This step is expected to enhance the efficiency and transparency of cross-border transactions.
Notably, India and UAE are at different places in their CBDC expedition. While India has been speedily working on the pilots, the UAE’s CBDC is still in the planning phase. India has been conducting both CBDC pilots since 2022 and is also planning to launch a full-scale CBDC (retail) by the end of 2023.
In addition, one of the largest retail Indian chains, Reliance Retail, announced that they have started accepting the digital rupee at one of its store lines and plans to extend the rollout to all its businesses.
On the other hand, in mid-February, the CBUAE released its Financial Infrastructure Transformation Program, and the issuance of a digital version of the UAE’s currency, the Dirham, was a part of it. According to the announcement, the project’s first stage sets up a “series of digital payment infrastructure and services,” including the issuance of a CBDC for “cross-border and domestic uses.”
It is important to note that even though Indian authorities promise the utmost privacy and security in their CBDC, it wasn’t well received by the Indian crypto community. Sources reveal that days after the Indian central bank released its concept note on its CBDC in 2022, the institution received backlash from the local crypto companies.
At the time, businesses accused the regulator of aiming to replace private digital assets with government-controlled CBDC and labeled the regulator’s move as a limited, conservative, and outdated perspective on cryptocurrencies.
On average, the crypto companies and Indian authorities do not see eye to eye on several issues including taxes, regulation, etc. The case seems to be the exact opposite for UAE as the nation has been striving hard to establish itself as a crypto hub. Nonetheless, Indian citizens have been found to be fond of crypto despite the lack of clarity on regulations.
However, the collaboration between the two central banks on CBDCs marks a significant milestone in the adoption of digital currencies globally. It could pave the way for similar collaborations between other nations, ultimately leading to the widespread adoption of digital currencies.
CBDCs have become a very familiar and attractive concept for nations around the globe, with several nations bringing their digital currencies. In the past year, many countries started their CBDC journeys, like Zimbabwe, Pakistan, etc. whereas some countries started the distribution, like China.
In November, Todayq News reported that the Bank of Japan would begin working with commercial banks and other organizations in the spring of 2023 to identify any issues with deposits and withdrawals and verify that a central bank digital currency (CBDC) can function during natural catastrophes and in places without an internet connection.