Amid the race for digital currency, India and the United Arab Emirates (UAE) have agreed to jointly conduct pilot programs on Central Bank Digital Currency (CBDC).
The memorandum of understanding to that effect was signed on Wednesday.
According to the press release that followed the signing, the collaboration aims to improve the efficiency and transparency of cross-border transactions while fostering economic ties between both countries.
Investors King understands that Central banks across the world are looking into the development of digital currencies amid the growing popularity of cryptocurrencies as an asset class among retail and institutional investors.
Last year, India’s central bank unveiled its first pilot programme for the e-rupee, allowing some banks to use the digital rupee to settle secondary market transactions in government bonds. The Asian country has also started testing the digital rupee in 15 cities.
No doubt, Central Bank Digital Currency (CBDC) has been gaining momentum with many countries on the verge of launching a digital currency or conducting research.
The Bank of England and the Treasury have also set out a plan to introduce a new central bank currency while France, Omar and even the United States have all set up committees to look into the prospect of a Central Bank Digital Currencies.
It would be recalled that Nigeria joined the league of countries with a central bank-backed digital currency in 2021 when the CBN launched e-Naira, becoming the first country to do so in Africa.
What to Know About CBDC
Central Bank Digital Currency (CBDC) is a form of digital currency that is issued by a country’s central bank. They are similar to cryptocurrencies, except their value is fixed by the central bank and equivalent to the country’s fiat currency.
Among other benefits, a Central Bank Digital Currency will also enhance cashless policy. They are also not exposed to huge volatility or risk as in the case of cryptocurrency while they provide efficiency and faster transaction.