Saudi Arabia and the United Arab Emirates have announced further plans to launch a digital currency that will help their cross-border transactions. The cryptocurrency is one of seven joint initiatives, including a financial awareness youth training program, initiated by the Executive Committee of the Saudi-Emirati Coordination Council held over the weekend.
The proposed cryptocurrency will be used on a blockchain database maintained by the central banks of the two Arab nations and participating retail banks.
According to Emirates News Agency WAM,
“The cross-border digital currency will be strictly targeted at banks in an experimental phase with the aim of better understanding the implications of blockchain technology and facilitating cross-border payments.”
The project is currently in its pilot phase, following developments in December 2018, when UAE central bank governor Mubarak Rashed Al Mansouri first announced the proposed cryptocurrency as a study.
Saudi Minister of Communication and Technology Abdullah Alswaha explains,
“The first use case is smart contracts. There’s today a pilot between the Kingdom and the UAE to make sure we cut intermediary and the middle men. The second use is fintech. We can see this revolutionising the way we look at insurance, at hedging risk, creating new industries in that space. We are doubling down on blockchain and welcome partnerships in that space as well.”
Last year, the minister told Sputnik that he was considering using blockchain technology in trading operations with Russia.
“Absolutely, it will be our absolute pleasure and we welcome that investment.”
Despite a lack of public information on the project, the initiative could spark far-reaching use cases in cross-border transactions in addition to overhauling traditional financial infrastructure.
Andrea Bonaceto, who runs London-based blockchain tech investment fund Eterna Capital with three former BlackRock analysts, says,
“One of the first government-led initiatives that demonstrates a specific use case for blockchain, and shows that its impact across industries should be taken seriously.”
The UAE continues to attract attention as a destination for crypto-related businesses. In December 2018, Abu Dhabi Global Market, a financial free zone aimed at encouraging new business and attracting foreign investment, concluded the first phase of its blockchain enabled know-your-customer project in collaboration with advisor KPMG, posting a demo that shows how the technology works.
Previously, both Saudi Arabia and the UAE took a cautious approach to cryptocurrencies, citing asset speculation as a cause for concern.