According to the latest reports, the central banks of India and the UAE would be working together to introduce blockchain technology in their national banking ecosystem. India is already in the testing phase of its retail CBDCs with over 130 crores of digital Indian Rupee already in circulation.
As per the MOU, both banks will be conducting Pilot programs to test the interoperability and cross-border transactional capabilities of CBDCs. The UAE is yet to launch its CBDC and the Reserve Bank of India can assist the gulf nation to speed up its process of development and execution. India can also share the insights and other critical research points observed during the wholesale and retail trials in the country.
India is the second largest trading partner to the UAE with over $70 billion in total annual trade. The two countries not only share a wide variety of goods and services but the Emirates are also home to over 3.5 million Indian diasporas.
From cultural to economic, India and the UAE are strongly entwined and that can be witnessed in the political relations between the two countries. India is also one of the biggest importers of oil from the Emirates.
The development of an interoperable CBDC mechanism between the two countries will not only reduce the transactional cost to the economies but will also reduce dollar dominance in West Asia. This is critical for India to strengthen its currency and start using it for international trade. Apart from that, with an interoperable mechanism to settle the transactions, sending money back home would be much cheaper, faster, and more secure.
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