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this united arab emirates China and India are continuing to deepen their bilateral cooperation, including the digital currency initiative announced on Thursday.
The Central Bank of the UAE has signed an agreement with UAE artificial intelligence company G42 Cloud to start the process of eventually launching a digital version of the UAE currency, the dirham. The strategy will include a trade feasibility study with India, a soft-launch of a project called “mBridge” to facilitate international trade, and a feasibility study of using the currency in domestic wholesale and retail, the bank said in a statement. statement.
This follows the signing last week of a memorandum of understanding between the Central Bank of the UAE and the Reserve Bank of India on strengthening cooperation in financial innovation. The digital dirham announcement also follows a pilot program with central banks of India, China, Thailand and other entities, according to a separate statement.
What does it mean: Digital currency refers to currency that can only be held and traded digitally, as opposed to legal tender. It’s attractive because it doesn’t require the use of intermediaries. Digital currencies pegged to foreign currencies already exist, such as USDC pegged to the U.S. dollar. Digital currencies have the potential value of facilitating trade, and can also make it easier for people to obtain other countries’ currencies.
Iran and Turkey have also expressed interest in launching digital versions of their respective currencies.
Why it matters: The collaboration between the Central Bank of the United Arab Emirates and the Reserve Bank of India on the digital dirham is noteworthy. The UAE and India are increasingly cooperating on economic issues. Last year, the two countries signed a comprehensive economic partnership agreement, essentially a free trade agreement.
The launch of the digital currency project also demonstrates the UAE’s continued interest in fintech. In recent years, the UAE has attracted many cryptocurrency platforms. However, the downturn in global cryptocurrencies has had a negative impact on the UAE.encryption platform Kraken Closes Abu Dhabi Office in February after only one year in operation.
A digital national currency is a potentially more stable way of using virtual assets to boost the UAE economy.
learn more: India’s growing interest in Gulf regionespecially on energy, Jaime Moore-Carrillo wrote in Al-Monitor PRO’s trend report last month.
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