The United Arab Emirates (UAE) and Saudi Arabia have joined forces to create a cryptocurrency for cross-border transactions, according to Dubai-based GulfNews.
Emirates Investment Authority announced the news on December 12th at the Arab #FinTech Symposium in Abu Dhabi.
It is one of several moves to modernise the UAE’s Central Bank, such as implementing a national payment platform and improving crowdfunding regulations.
If successful, the digital currency will not be available to the public. Instead, banks will use it to complete transfers and payments on behalf of their clients.
“It would be more efficient and much more effective,” said Mubarak Rashed al Mansouri, CEO of Emirates Investment Authority.
A distributed ledger Proof of Concept (PoC) has already begun with the goal of “future-proofing” the UAE’s Central Bank.
However, the project is still in early stages. “It is just a study between UAE and Saudi Arabia,” al Mansouri explained. “[We] have not gone deeper into it.”
A World First?
Not too long ago, the UAE Central Bank condemned cryptocurrencies as risky and unregulated. The Khaleej Times reported in October 2017 that al Mansouri warned people of the perils of “digital coins.” Clearly, the bank chose not to follow this advice.
In fact, the UAE is doing the opposite.
While remarkable, that is hardly groundbreaking. But proposing a joint digital currency between national governments certainly is.
“This is probably the first time ever that witnesses the cooperation of monetary authorities from different countries on this topic.” – Mubarak Rashed al Mansouri, CEO of Emirates Investment Authority
Saudi Arabia and the UAE, a kingdom and a federation of 7 emirates respectively, have historically held close economic bonds. The nations share a border and both face onto the Persian Gulf.
If successful, this latest venture will bring them closer than ever and set an important precedent. Al Mansouri hopes that this achievement will encourage similar collaboration in the region.
The Middle East and Crypto
There has been a recent wave of crypto activity in the region.
In November, Iranian financial authorities heralded the launch of a national digital currency to combat American sanctions.
“Digital currencies could provide a way for [Iran] to avoid U.S. dollar transactions, as well as a possible replacement of the SWIFT interbank payment system.” – A senior Iranian official
While Iranian bankers say US sanctions are the main reason to pursue a digital currency, the Saudis and Emiratis cite transactional efficiency.
But as fallout from the Khashoggi murder continues, Saudi Arabia might find itself in America’s bad books – and in need of other economic allies.
The proposed joint cryptocurrency with the UAE could be the first of many with other neighbouring countries.
Just the Beginning
From Turkey to Bahrain, digital and crypto currencies are gaining popularity – and national governments aren’t the only ones behind it.
Swiss investment firm X8Currency received Shari’a certification last month which gives access to the world of Islamic banking. And with more than 1.6 billion Muslims worldwide, they represent a lucrative market.
Now, with news that Saudi and Emirati state actors will be joining the crypto revolution too, more private businesses are flocking to the region.
The startups are a response to growing uncertainty about the strength of international monetary systems. And as Middle Eastern governments turn to cryptocurrency solutions, why shouldn’t the people?
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Liz is a Canadian journalist and writer for Bitcoin Australia. Connect with her on Twitter @Elizabeth_Utley, or on Linkedin as Elizabeth Utley.