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

According to a formal statement, the two central banks would work together under the Agreement to examine interoperability between the CBDCs of CBUAE and RBI as well as other new areas of fintech, namely Central Bank Digital Currencies (CBDCs).

It is anticipated that this bilateral testing of CBDC cross-border use cases will lower costs, improve the effectiveness of cross-border transactions, and strengthen economic connections between India and the UAE. The statement continued, “The MoU also provides for technical cooperation and information sharing on issues relating to fintech and financial goods and services.

A digital token called the “Digital Rupee” stands in for actual money. The Digital Rupee is issued by the RBI in the same denominations as coins and paper money, and it is distributed by banks.

On November 1, 2022, the RBI began testing the Digital Rupee in the wholesale sector (e-W), and on December 1, 2022, in the retail sector (e-R).

As of February 28, 2023, there were 130.41 Cr worth of digital rupee in circulation, according to recent information from the Union Ministry of Finance.

According to the ministry, the retail CBDC accounts for a portion of the total circulation of INR 4.14 Cr, while the wholesale CBDC accounts for the remainder INR 126.27 Cr.