The cryptoactive will be used for the cross-border and commercial exchange of both countries without replacing, for the time being, fiduciary money
The Executive Committee of the Saudi-Emirati Coordination Council agreed on Saturday, January 19th, to develop a cryptocurrency with the intention of facilitating cross-border payments between both nations.
The news was announced through the official website of the news agency of the United Arab Emirates, Emirates News Agency. “The virtual currency is based on the use of a database distributed among central banks and participating banks on both sides. It seeks to protect the interests of customers, establish technology standards and assess cybersecurity risks”, says the official statement.
As the article expands, this cryptocurrency “will be strictly directed to banks in an experimental phase, with the aim of better understanding the implications of blockchain technology and facilitating cross-border payments”. In addition, the joint cryptocurrency project will also have a research team, which will study the effect of a central currency on financial policies.
It was the first meeting of the Executive Committee of the Coordinating Council of Saudi Arabia and the Emirates, held in Abu Dhabi. There the 16 members from both sides participated. The objective of the meeting was “to monitor the execution of the joint initiatives”, among which the projects of economic, social and military integration between both countries stand out.
At the meeting seven agreements pertaining to a “strategic plan of joint initiatives” were signed. The agreements include the creation of an experimental cryptoactive, which will operate exclusively with the participation of the Central Banks and the commercial banks of both kingdoms. This project was approved along with a plan to streamline the binational flow in customs, a common market for civil aviation and a support platform for the PYMI sector (small and medium industry), among others.
In this first phase, the joint cryptoactive will allow the financial sector of both nations to better understand the use of blockchain technology, facilitate cross-border payments and evaluate the impact of a central currency on the individual monetary policies of each country.
“The virtual currency is based on the use of a distributed database between central banks and participating banks on both sides, seeking to protect the interests of customers, establish technology standards and assess cybersecurity risks”, the agency said.
These plans for the development of a cryptoactive for the exchange between the Kingdom of Saudi Arabia and the United Arab Emirates have been planned for more than a year. At the end of last year, the project was announced as the first of its kind in that region.
In October 2018 the official announcement of the project was made and in November, Mohsen Al Zahrani, Head of Innovation of the Monetary Authority of Saudi Arabia, the country’s financial regulator, said that the cryptocurrency will be ready by mid-2019 and that the project allows cross-border payments with some banks.
Also in November 2018, Mubarak Al-Mansouri, Governor of the Central Bank in the United Arab Emirates, confirmed that the project entered to the design stage and that it would be ready by mid-2019. Al-Mansouri assured that the cryptocurrency “will not replace fiduciary money, but it will be a new payment tool used by banks and not by individuals”.
The Saudi monarchy is in agreement with the plan, although in August last year the authorities declared the trade with cryptocurrencies in the Kingdom of Saudi Arabia as illegal. The Arab Emirates, on the other hand, has shown greater openness. It accepted the Initial Currency Offers (ICO) as a form of financing for companies and has even submitted Artificial Intelligence (AI) and blockchain projects. The acceptance and construction of the blockchain world in these countries continues in process.
By María Rodríguez