The Saudi Arabian Monetary Authority (SAMA) and the Central Bank of the United Arab Emirates’ (UAE) have announced plans to issue a cryptocurrency to facilitate financial transactions between the two nations.
The announcement was made by CBUAE Governor Mubarak Rashed Al Mansouri, speaking at the Arab Fintex Forum in Abu Dhabi on Wednesday (Dec 12), who he said he hoped that the project would encourage more financial cooperation between countries in the region and beyond.
“This is probably the first time ever that witnesses the cooperation of monetary authorities from different countries on this topic and we hope that this achievement will foster similar collaboration in our region,” said Al Mansouri according to a report in regional media outlet Arabian Business.
While Al Mansouri said that the UAE and Saudi Arabia are currently studying the development of the blockchain-backed currency, there is no framework or timeline in place, noted the report.
The new cryptocurrency is not intended for consumer use, but rather to increase the efficiency of cross-border transactions conducted by the country’s respective central banks.
“CBUAE and Sama intend to execute a joint crypto-currency and distributed ledge proof-of-concept (PoC),” said the CBUAE in a statement.
“The PoC’s design mainly focuses on the transfer of ownership of a central bank asset among participants,” it added.
In his address at the Arab Fintex Forum Al Mansouri said that Fintech presents many opportunities and challenges for the sector.
“Crowd-funding platforms and blockchain technologies are a case in point,” he noted.
“Crowd-funding platforms, for example, have gained widespread attention and growth over the previous years. At the central bank of the UAE, we started developing regulations in this regard in 2016 in order to safeguard the financial system and protect consumers. This project is at a final stage.”
In his opening remarks at the forum, Dr Alfred Hannig, Executive Director of the Alliance for Financial Inclusion (AFI) emphasised the need for increased cooperation and knowledge sharing between countries in the Arab region.
“It does not only build on effective peer learning among emerging economy financial regulators, it also counts on substantive joint learning processes including regulatory institutions of advanced economies,” he said.
He also spoke about the importance of utilising blockchain technology to increase financial inclusion and the efficiency of cross-border transactions.
“Blockchain, a type of Digital Ledger Technology (DLT) is described to potentially hold promise as a valuable financial inclusion technology. Some of the applications using DLTs could include remittances, e-KYC, SME Finance, interoperability between banking and payment platforms, and correspondent banking, just to mention a few from a financial inclusion angle,” he said.
While Dr Hannig was extremely positive about the potential of blockchain technology to help bring essential financial services to the unbanked, he also acknowledged the importance of careful regulation to protect consumers and national financial industries.
“As with all emerging technology, evidence requires time to be established. Currently, we still see major application of this technology in cryptocurrencies – which could potentially pose AML/CFT and consumer protection risks,” he said.
The Arab Fintex Forum is a major event in the region and this year attracted key financial regulators from across the region. Among them were Dr Abdulrahman Al-Hamidy, Director General Chairman of the Arab Monetary Fund (AMF); Rasheed Mohammed Al Maraj, Governor of the Central Bank of Bahrain; Marouane El Abassi, Governor of the Banque Centrale de Tunisie; Mr Andreas Kuck, Country Director of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ); and Dr Najy Benhassine, Director of the Finance, Competitiveness and Innovation Global Practice (FCI) Group of the World Bank.