A Saudi-Emirati pilot crypto-currency was announced at the inaugural meeting of the Saudi-Emirati Coordination Council in Abu Dhabi last week.
A number of joint blockchain and digital currencies joint initiatives between the United Arab Emirates and Saudi Arabia were discussed at the meeting by the Council’s committee, which is headed by Mohammad bin Abdullah Al Gergawi, Minister of Cabinet Affairs and The Future, from the UAE side, and Mohammed bin Mazyad Altwaijri, Minister of Economy and Planning, from the Saudi side.
According to the Emirates News Agency, the alliance forms one of the “strongest economic partnerships in the world.”
The Saudi-Emirati pilot crypto-currency will reportedly be targeted towards banks in order to facilitate cross border transfers. That there were no further details on the specific blockchain the new digital currency will be using indicates it could be developed internally rather than relying on a third party tech provider.
Ripple’s xRapid product is one of a number of existing technology solutions to blockchain-based cross border payments that would seem to fit the bill. A number of banks in Asian have already joined RippleNet to use the system, that promises cheaper and faster inter-bank transfers, but, as the UAE and Saudi collaboration has announced no partner, that means the blockchain platform is probably going to be a private one controlled by the central banks and will have no public access.
“The virtual currency relies on the use of a distributed database between the central banks and the participating banks from both sides,” is all the Emirates News Agency said on the tech platform, adding that the project seeks to safeguard customer interests, set technology standards and assess cybersecurity risks while also determining “the impact of a central currency on monetary policies.”
The Middle East is not the only region exploring blockchain for banking. China recently announced a “Trade and Finance Interbank Trading Blockchain Platform” which will be used domestically and, according to the China Banking Association, will build “a new trade finance ecosystem” with the aim of improving the efficiency of financial services.”
The China project uses fintech firms such as Beijing-based startup PeerSafe to provide technical support, but the venture is entirely state-controlled.
Coinone is the first company in South Korea to turn to blockchain to improve cross border transfer and remittance efficiency, but has decided to use Ripple’s services to develop its payments platform. In India, however, Facebook has reportedly set up its own tech teams to develop a remittance-focussed blockchain platform.
It’s understandable why central banks are more reluctant to use third-party companies for financial services, especially when dealing with other nations, but that Saudi Arabia and the UAE are the latest to turn to blockchain in search of more efficient payment methods is a testament to the technology’s growing mainstream importance.