The United Arab Emirates and China conduct the first cross-border transaction using digital dirham – New solutions in global trade exchange
The United Arab Emirates and China Make First Cross-Border Transaction Using Digital Dirham
The United Arab Emirates and China have recently made a historic move by executing the first cross-border transaction using the digital dirham, the official currency of the UAE. The transaction involved the transfer of an impressive sum – 50 million dirhams, which is approximately $13.6 million, from the UAE to China.
New Digital Platform Facilitating Cross-Border Transactions
The realization of this transaction was made possible through a new digital platform developed in collaboration between both countries. The main objective of this initiative is to eliminate the inefficiencies often encountered in cross-border transactions, stemming from high costs, lack of transparency, and the increasing politicization of trade exchanges.
Digital Currencies in Cross-Border Settlements and the Development of CBDC
The use of digital currencies in cross-border transactions marks a significant milestone in the development of Central Bank Digital Currency (CBDC). Currently, the dominant player in the international market is the US dollar, which brings about certain issues related to political aspects.
To reduce the risks associated with the reserve unit, many countries, especially from the Global South, are seeking alternative solutions. One possibility being considered is the creation of a universal settlement instrument supported by a basket of currencies from BRICS countries, a group composed of ten influential nations from various regions of the world.
Modernization of Global South Countries
Despite the common belief that Global South countries are unable to achieve progress like their Western counterparts, these nations are striving for rapid modernization within the new international order. In this context, the UAE and China serve as an excellent example of cooperation aimed at modernizing and streamlining global financial transactions.
Author: Former Prime Minister of Kyrgyzstan, Lecturer at the Belt and Road School
