Chinese and UAE Central Banks Sign an MoU to Advance Their Cooperation in Digital Currencies.

Chinese and UAE Central Banks Sign an MoU to Advance Their Cooperation in Digital Currencies.

This week in Beijing, at the third "Belt and Road" International Cooperation Summit Forum, the Central Banks of China and the United Arab Emirates (UAE) signed Memoranda of Understandings (MoUs) pertaining to digital currencies.

A memorandum of understanding on enhancing digital currency cooperation between the People's Bank of China (PBOC) and the Central Bank of the United Arab Emirates has been signed.

The First Abu Dhabi Bank (FAB), the largest bank in the UAE, and the state-owned commercial Bank of China (BoC) have also signed a cooperation agreement regarding digital currencies.

The mBridge project's current partnership between the two central banks is strengthened by this development, which concentrates on cross-border payments.

The Bank for International Settlements (BIS), the central banks of Thailand, and Hong Kong are also participants in the mBridge initiative.

Digital currency agreements were mentioned in the Belt and Road announcements.

Further cooperation with the Bank of Indonesia was alluded to in the Belt and Road announcement, though it is still unclear whether this relates to virtual money. A digital rupiah program in Indonesia has been actively being investigated.

The UAE's advisor on digital currency, Shu-Pui Li, has emphasized the potential for cooperation, particularly in light of Chinese companies' preference for using the eCNY (digital yuan) for payments, a currency that is widely accepted by UAE corporations.

This interdependence can be attributed to the 300,000 or so Chinese workers who are employed in the UAE, where there is a sizable Chinese population.

The UAE serves as a transit country for nearly 60% of Chinese trade with the Middle East and North Africa.

Li also discussed the implications of the Belt and Road initiative, arguing that the use of Central Bank Digital Currencies (CBDCs) for infrastructure payments would eliminate the need for middle banks.

This strategy minimizes delays while also cutting costs, which is a crucial consideration given the recent use of the Swift network for sanctions-related purposes.

The Bank of China stands out as one of the few commercial banks with direct access to the digital yuan CBDC, a significant advantage that places it at the forefront of digital currency innovation.

Pilot testing of JPMorgan's Coin System by First Abu Dhabi Bank was successful.

The UAE has been actively pursuing its agenda for digital currencies. A pilot for JPMorgan's Coin Systems solution was successfully completed, according to a recent announcement from the First Abu Dhabi Bank.

Prior to now, the UAE had made known its intentions to work on a broad range of CBDC projects, including applications for retail, wholesale, and cross-border CBDC.

A bilateral cross-border CBDC venture with India is the second most important item on this ambitious agenda after the mBridge cross-border payment project.

R3 is a significant partner for the domestic CBDC work, and proofs of concept for both wholesale and domestic CBDCs are planned to be finished by mid-2024.

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