The Central Bank of the UAE and the Reserve Bank of India have agreed to jointly explore innovation in financial products and services, especially Central Bank Digital Currencies (CBDC)

UAE and India will jointly explore CBDC interoperability. Image: pixabay

The central bank institutions of the United Arab Emirates (CBUAE) and India (RBI) have signed a Memorandum of Understanding (MoU) to enhance cooperation and enable innovation in financial products and services, including interoperability between the CBDCs of the two banks.

Central Bank Digital Currencies (CBDC) are the focal point of the agreement. The two institutions plan to?jointly conduct proof-of-concept (PoC) and pilot trials of the bilateral CBDC bridge. It is supposed to facilitate cross-border CBDC transactions for both remittance and trade purposes.

Furthermore, the cross-border use case of CBDCs has the potential to reduce costs, increase the efficiency of cross-border transactions and enhance the economic cooperation between India and the UAE.

Besides exploring the CBDC concept, the MoU includes a commitment to technical collaboration and knowledge sharing on matters related to other fintech and financial products and services, emerging trends, regulations and policies.

RBI has been working on a phased implementation of a digital rupee for a while. The bank considers both wholesale and retail CBDCs, which are supposed to improve settlement systems and offer direct access to safe money for payment and settlement.

In February, Reliance Retail became?the first retailer in India to start accepting digital rupee CBDC as a payment means taking part in the large-scale trial.

At about the same time, CBUAE?launched the Financial Infrastructure Transformation (FIT) Programme which includes?the issuance of Central Bank Digital Currency for cross-border and domestic uses as one of the main components.