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(Kitco News) - India and the United Arab Emirates (UAE) have announced that they will collaborate on central bank digital currencies (CBDC) through the launch of a joint pilot program, according to a press release from the Reserve Bank of India (RBI).
The RBI has signed a Memorandum of Understanding (MoU) with the Central Bank of the United Arab Emirates (CBUAE) that is meant to “enhance cooperation and jointly enable innovation in financial products and services.”
Under the terms of the MoU, the central banks will collaborate in several emerging sectors of FinTech, including explorations into the interoperability of the CBDC released by the RBI and CBUAE.
The central banks plan to jointly conduct proof-of-concept and pilot tests of bilateral CBDC bridges designed to facilitate cross-border CBDC transactions related to remittance and trade.
“This bilateral engagement of testing cross-border use case of CBDCs is expected to reduce costs, increase efficiency of cross border transactions and further the economic ties between India and UAE,” the press release said. “The MoU also provides for technical collaboration and knowledge sharing on matters related to Fintech and financial products and services.”
India’s CBDC development is among the most advanced in the world, with its retail CBDC (rCBDC) pilot currently ongoing in 15 cities with more than 50,000 customers and 10,000 merchants participating in the trial. If the pilot goes smoothly, the RBI is looking to have the full-scale launch of its rCBDC by the end of 2023.
Tassat to facilitate FedNow payments
In the U.S., blockchain operator Tassat has announced that it will provide access to the Federal Reserve's FedNow payment system, which is expected to launch as a pilot project later in 2023.
FedNow is a real-time, around-the-clock payment service for depository institutions being developed by the Federal Reserve. It is designed to enable individuals and businesses to send instant payments, while banks will be able to build products on top of the FedNow platform.
According to a report from Cointelegraph, Tassat will serve as a business-to-business onramp for FedNow through a client-facing application programming interface (API). Both the company’s interbank and intrabank services will provide FedNow access.
The FedNow system facilitates real-time gross settlement by channeling commercial bank money from a sender through a Fed credit account to its recipient.
Federal Reserve Vice Chair Lael Brainard previously indicated that the central bank plans to officially launch FedNow by July 2023. While the pilot program will initially include support for a small number of banks, it will eventually expand to add more participants. More than 120 organizations have already signed up to participate in the pilot program, including U.S. Bank and Exchange Bank.
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The Federal Reserve opted to develop FedNow as an alternative to a digital dollar or dollar-backed stablecoin. Initially, the service will only be available for domestic transfers, giving time for the U.S. government to update its financial infrastructure.
“We have a lot of work to do here in America,” said Tassat CEO Kevin Greene, who referred to the U.S. financial infrastructure as “antiquated.”
Tassat had signed on six banks to participate in the trial, but those plans will need to be adjusted as one of the banks was Signature Bank, which was recently taken over by the government.
"Recent events have illuminated the existential crisis that small, mid-sized and regional banks face, particularly being squeezed out by the mega banks,” Greene said, noting that blockchain adoption in the banking system is a rapidly rising trend. “Sixteen months ago, most bank CEOs didn’t know much about blockchain at all, and today the feeling is […] they have to have some kind of blockchain strategy.”
While the Federal Reserve is moving forward with its FedNow development, there are also pilot programs currently underway testing the feasibility of creating a digital dollar, which could potentially be issued directly to U.S. residents by the Fed through the FedNow System if they opt to integrate it with blockchain technology.
