- Digital currency is backed by the UAE central banks and will facilitate easier cross-border payments
- It will not replace fiat currency but will be a tool for inter-bank payments
- Motivation for the project is the recent developments in the fintech industry
A digital currency for the United Arab Emirates backed by the Saudi Arabia central Bank has entered the design stage. The joint project is being pursued to facilitate easier cross-border payments with several banks.
Middle East to Go Digital
The Saudi Arabia Monetary Authority (SAMA) Head of innovation Mohsen Al Zahrani told the Saudi Press Agency on Tuesday, November 20, 2018, the project is nearing completion and could be ready by the middle of 2019.
Al Zahrani, who was speaking on the sidelines of the Blockchain Future Applications Conference on Tuesday, said SAMA was studying the feasibility of the cryptocurrency being rolled out among all banks.
The announcement by Al Zahrani corroborates a similar one by Mubarak Al-Mansouri, governor of UAE’s Central Bank who confirmed to the local Agraam news outlet on Monday, November 19, 2018, the joint digital currency project had entered design phase. The date of the launch, according to him, will be determined “according to the Saudi part and the current study.” He further said the digital currency would be used in all payments and added:
“The digital currency will not replace a certain bill, but it will be a new payment tool used by banks not individuals.”
The UAE Central Bank undertook a joint project with Saudi Arabia Monetary Authority (SAMA) in December 2018 to use the power of blockchain technology to create a digital currency that would help facilitate cross-border payments between both countries. Commenting about the project on December 13, 2017, during a high-level meeting for the Arab region on Global Banking Standards and regulatory and Supervisory Priorities, UAE’s Central Bank Governor said:
“CBUAE and SAMA intend to execute a joint crypto-currency and Distributed Ledger Proof-of-Concept (PoC). The PoC’s design mainly focuses on the transfer of ownership of a central bank asset (crypto-currency) among participants.”
Before the announcement, the UAE Central Bank did not recognize digital currencies like Bitcoin because of their speculative nature and the risks associated with cryptocurrency investment while Saudi Arabia Authority has warned citizens against trading in Bitcoin since it was not within the bank’s regulatory reach.
According to Al Mansouri, the motivation for the project was the recent developments in the Fintech industry, which he said presented both challenges and opportunities for the industry and that it was the responsibility of participants and regulators to understand the attendant risks and look for ways to monitor and mitigate them.
UAE at the Forefront of Crypto Developments
UAE has made the news in the recent past by creating several crypto-related payment platforms besides creating a special legal framework for the blockchain technology. The country also announced earlier this month it was getting its first cryptocurrency exchange.