India and the UAE Will Have an Interoperable CBDC!

The United Arab Emirates (UAE) thought that issuing a CBDC would solve its problems with cross-border payments and “promote innovation for domestic payments.”

India and the UAE have expressed interest in working together to develop an interoperable CBDC. This will make international sales transactions and money transfers easier to complete.

This cooperation may result in other collaborations of this kind across nations, and it may also hasten the widespread use of electronic currencies.

The media release states (1) that the Central Bank of the UAE and the Reserve Bank of India have signed an MoU that enables the two apex banks to create and pilot-test interoperable CBDCs.

A proof-of-concept (PoC) test of a bilateral CBDC bridge will be carried out in conjunction with the banks, and they will also begin a collaborative pilot test that will take place across both countries.

The Reserve Bank of India (RBI) first started testing of its retail CBDC within a limited user group at a few select sites nationwide. Over 10,000 clients and 50,000 customers in 15 different cities have participated in the test so far.

The Reserve Bank of India intends to follow up by introducing a digital currency by the end of the year.

The UAE was the first country in which the FIT program was implemented, and the process’s first step was issuing a CBDC. The nation anticipated that issuing a CBDC could address the difficulties it was having with cross-border payments and “promote innovation for domestic payments.”


The Previous Position Does Not Encourage Confidence in the Capability of Interoperable CBDCs

Concerns have been raised regarding the possibility that India’s digital asset policies could hurt the collaboration results. Historically, India has maintained a tight stance towards the asset class.

In addition to working toward an outright ban on crypto, the administration has also placed a thirty percent tax on any income made from using cryptocurrencies.

Moreover, it imposed a TDS tax of 1% on selling crypto assets, which caused many traders to exit the market.

Once more, the bank disseminated its concept notes for cryptocurrencies, which resulted in criticism from regional cryptocurrency businesses.

It was alleged that the central bank was involved in a conspiracy to replace private digital currencies with an asset controlled by the government.

The Reserve Bank of India (RBI) argued that the provision of risk-free assets to individuals falls under the government’s jurisdiction and that this cannot be accomplished through the use of private assets in its defense.

The decision was described by one executive as conventional and archaic, and it was interpreted as an indication of a lack of knowledge of crypto assets.


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