The central banks of the United Arab Emirates and Saudi Arabia are starting a pilot initiative that would test a new cryptocurrency for cross-border payments.
Reports say UAE central bank governor Mubarak Rashid al-Mansouri revealed this during a gathering of the Arab Monetary Fund (AMF).
The cryptocurrency would be founded on blockchain, the shared ledger of transactions that is maintained by a network of computers.
The two central banks have expressed skepticism about currencies such as bitcoin.
The UAE Central Bank even said that it did not recognize bitcoin as a legitimate currency.
And in July, the Saudi central bank cautioned against trading bitcoin because it was outside the bank’s regulatory reach.
But Al Mansouri said the central banks were inclined to understand blockchain technology better.
He said the UAE-Saudi digital currency would be used among banks, not by individual consumers.
This would make transactions more efficient.
“It is digitization of what we do already between central banks and banks,” Al Mansouri said.
“This is the first time the monetary authorities of two countries cooperation to use blockchain technology”, he added.
He also expressed hope that the initiative would drive multi-party monetary cooperation in the region.
Al Mansouri related that the study is still in its initial phase.
He disclosed that no date has been set to launch the joint digital currency.
UAE and Saudi Arabia Links Better
10 years ago, the UAE and Saudi Arabia examined the possibility of creating a single currency among members of the GCC.
However, that did not prosper after the UAE pulled out of the project in 2009.
But diplomatic and economic links between the UAE and Saudi Arabia have been better this year.
Just last week, the UAE said it wants to establish a bilateral committee with Saudi Arabia on economic, political and military issues.
The involvement of Saudi Arabia’s central bank is of note.
This is because the institution has not remarked on the tech or indicated that it was looking into potential use cases.
In stark contrast, the UAE is home to a number of private and public sector-driven initiatives.
This includes Dubai’s Global Blockchain Council.
A number of financial institutions have examined uses of the tech in recent months.
Such firms include Emirates NBD, which is developing a blockchain-based service for validating bank cheques.
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