RBI, UAE Central Bank Join Hands To Facilitate Cross-Border CBDC Transactions

The Reserve Bank of India (RBI) on Wednesday (March 15) signed a memorandum of understanding (MoU) with the Central Bank of the United Arab Emirates (CBUAE) to jointly conduct proof-of-concept and pilot(s) of bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade, and enable innovation in the financial products and services segment.

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, as per an official statement.

“This bilateral engagement of testing cross-border use case of CBDCs is expected to reduce costs, increase the efficiency of cross-border transactions and further the economic ties between India and UAE. The MoU also provides for technical collaboration and knowledge sharing on matters related to fintech and financial products and services,” the statement added.

Digital Rupee is a digital token that represents legal tender. The RBI issues Digital Rupee in the same denominations as paper currency and coins and is distributed through banks.

The RBI launched pilots in Digital Rupee in the wholesale segment (e₹-W) on November 1, 2022, and in the retail segment (e₹-R) on December 1, 2022.

The Union Ministry of Finance recently said that Digital Rupee worth INR 130.41 Cr was in circulation as of February 28, 2023.

Of the total circulation, the share of the retail CBDC is worth INR 4.14 Cr, while the remaining share comprises the wholesale CBDC at INR 126.27 Cr, according to the ministry.

Currently, nine banks are participating in the wholesale CBDC pilot. State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC are included in the pilot.

On the other hand, SBI, ICICI Bank, IDFC First Bank, Yes Bank, Kotak Mahindra Bank, Bank of Baroda, Union Bank of India, and HDFC Bank are offering retail CBDC services to select users.

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