SAMA explained that it already uses blockchain channels to make fund transfers.
The Central Bank of Saudi Arabia informed that it would be using blockchain technology to conduct funds transfers to banks in the country. This information was public in a recent statement that the Saudi Arabian Monetary Authority (SAMA) issued.
According to an official SAMA statement, the central bank is transferring these funds as part of an effort that the institution makes to enhance “the capabilities to continue its role in the provision of credit services.”
Although the bank informed that it conducts this type of transaction, it did not offer further details of the approximate amounts that it transfers through this route.
SAMA and its Interest in Using Blockchain Technology
According to some studies on blockchain technology adoption, the Middle East is experiencing a growth in the use of blockchain technology, especially in the use of these platforms for the financial and commercial sectors. In this way, in recent times, SAMA has managed to have a significant impact regarding the use of blockchain technology in remittances that circulate between banks in the United Arab Emirates and Saudi Arabia.
Previously, SAMA would have already defined its interest in the use of these platforms in different areas. During 2018, the Arab authority achieved a partnership with the Central Bank of the United Arab Emirates (UAE) to create a type of digital currency that would serve to make transfers between countries, using blockchain technology. The plan would work with a single currency that would serve only between the two countries.
In a comment that SAMA published, the authority highlighted its interest in blockchain technology. SAMA also explained that this is part of a plan to innovate in the development of first-class financial tools.
“SAMA is one of the pioneering Central Banks to experiment with blockchain technology for money transfers. At the moment, it is one of the key innovative initiatives launched by SAMA in its program to enable and develop Fintech in the Kingdom.”
According to spokespersons of these financial institutions, blockchain technology could open up a full field of skills that would help both institutions maintain sustained and secure growth in various areas. Security, speed, and the opportunity to reduce costs are some of the most attractive benefits for the adoption of new technologies.
Although the use of cryptocurrencies is not clearly defined, banks rely on unique token technology for transactions between institutions. This is because this technology could accelerate and improve financial processes that were previously difficult to achieve with the traditional system.
Currently, there is a greater relationship between financial institutions and governments, this is to establish methods that strengthen the economic sectors of the countries. These relationships reinforce the need for blockchain adoption in today’s finance.
There is a recent example of the importance of the relationship between financial institutions and governments. A bank of Turkish origin made its first transaction to finance the use and development of blockchain technology in international trade.
In this way, financial institutions around the world are showing more and more interest in technologies like blockchain to accelerate international payments, something that would boost, even more, the adoption of Distributed Ledger Technology (DLT).
By María Rodríguez