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UAE, Saudi Arabia Launch Cryptocurrency Pilot for Cross-Border Payments

Last Updated September 28, 2020 4:39 PM
Habiba Tahir
Last Updated September 28, 2020 4:39 PM

By CCN.com: UAE and Saudi Arabia — two countries that have the world’s second-largest combined sovereign wealth funds — have launched their pilot cryptocurrency.

According to UAE’s official news agency, Emirates News Agency , the Saudi-Emirati cryptocurrency is one of the seven initiatives that will be implemented in both countries.

Saudi-Emirati Cryptocurrency Restricted to Banks Only

Formed in 2016, the Executive Committee of the Saudi-Emirati Coordination Council met for the first time in UAE on January 19. The Council announced that the new cryptocurrency will be used for cross border payments between central and local banks.

The cryptocurrency will serve as an experiment to understand blockchain technology and allow seamless transactions across the two countries.

The cryptocurrency pilot will see payment flows between the two neighbouring nations in the Middle East. Pictured: Abu Dhabi’s skyline, via Shutterstock

An excerpt from the announcement stops short of revealing the blockchain deployed, explaining:

The virtual currency relies on the use of a distributed database between the central banks and the participating banks from both sides. It seeks to safeguard customer interests, set technology standards and assess cybersecurity risks. The project will also determine the impact of a central currency on monetary policies.

As reported by CCN.com last year, financial institutions in both countries studied the new technology extensively before implementing the initiative.

UAE: Safe Haven for Blockchain & Crypto Companies?

In December 2018, UAE’s Securities and Commodities Authority (SCA) recognized ICO tokens as securities. It was also announced that they were working on a regulatory framework to be released in mid-2019.

UAE’s authorities are treading carefully as they deal with cryptocurrencies, but continue to actively encourage blockchain development in the country.

In 2016, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, launched a blockchain strategy that plans to transfer all government documents on a blockchain by 2020.

UAE’s Emirates Islamic Bank also tested blockchain technology by submitting cheques on a blockchain ‘Cheque Chain’ in 2017. Once the pilot was successful, its parent bank Emirates NBD launched  the initiative last year and registered one million cheques in the first month alone.

In November 2018, UAE’s Hilal Bank became the first Sharia bank to use blockchain technology for the transaction of a Sukuk, a bond complying with Sharia standards.

Some of the leading blockchain and crypto companies have already started looking towards UAE to expand their services. The country has already welcomed crypto exchange Huobi and plans to launch a cross-border payment service in partnership with RippleNet in 2019.