During the recent third “Belt and Road” International Cooperation Summit Forum in Beijing, the Central Banks of China and the United Arab Emirates (UAE) have formalized memoranda of understanding (MoUs) concerning digital currencies.
The People’s Bank of China (PBOC) has entered into an agreement to enhance digital currency collaboration with the Central Bank of the UAE.
Simultaneously, the state-run Bank of China (BoC) has cemented a digital currency partnership with the First Abu Dhabi Bank (FAB), the leading bank in the UAE.
These advancements are an extension of the ongoing collaboration between the two central banks within the framework of the mBridge project, which is centered on facilitating cross-border payments.
It’s worth noting that the mBridge venture also encompasses the Bank for International Settlements (BIS) and the central banks of both Thailand and Hong Kong.
The Belt and Road Announcements Included Digital Currency Agreements
During the Belt and Road announcement, there were indications of an enhanced partnership with the Bank of Indonesia. However, the specifics of whether this involves digital currency remain nebulous. Notably, Indonesia has been keenly delving into its digital rupiah initiative.
Shu-Pui Li, the UAE’s digital currency advisor, highlighted the vast opportunities for cooperation. This comes especially in light of the inclination of Chinese businesses towards using the eCNY (digital yuan) for transactions, a mode of payment that UAE enterprises are increasingly warming up to.
This harmonious alignment can be traced back to the significant number of Chinese nationals in the UAE, with an estimated 300,000 Chinese professionals working there.
Furthermore, the UAE serves as a pivotal conduit for Chinese commerce, with nearly 60% of its trade with the Middle East and North Africa region flowing through the country.
Li delved deeper into the ramifications of the Belt and Road initiative, positing that Central Bank Digital Currencies (CBDCs) might be harnessed for infrastructure-related payments, sidestepping the dependency on intermediary financial institutions.
Such a strategy could not only curtail expenses but also diminish transaction lag times. This is especially relevant in light of recent events where the Swift network was employed for sanctioning purposes.
Distinctively, the Bank of China emerges as one of the handful of commercial banks granted direct access to the digital yuan CBDC. This privilege undoubtedly places it in a vanguard position in the realm of digital currency advancements.
First Abu Dhabi Bank Successfully Completed Pilot for JPMorgan’s Coin System
The UAE has been steadfast in advancing its digital currency ambitions. A testament to this effort is the First Abu Dhabi Bank’s recent declaration of successfully concluding a trial run with JPMorgan’s Coin Systems solution.
The nation had earlier unveiled an extensive blueprint for CBDC endeavors that span retail, wholesale, and international CBDC applications.
The mBridge initiative, focused on cross-border payments, stands out as a cornerstone in this expansive roadmap. It’s closely followed by a joint cross-border CBDC project in collaboration with India.
Anticipations are high for proofs of concept pertaining to both local and wholesale CBDCs. These are slated for culmination by mid-2024, with R3 playing an instrumental role in the domestic CBDC undertakings.