UAE, Saudi Arabia use digital currency for settlements

UAE, Saudi Arabia use digital currency for settlements
We hope the potential success of this initiative will foster similar collaboration in the GCC region, says Mubarak RashidAl Mansouri.

dubai - The UAE works on a plan to develop FinTech supported by a regulatory framework

By Waheed Abbas

Published: Wed 12 Dec 2018, 7:10 PM

Last updated: Sat 15 Dec 2018, 8:30 AM

The UAE and Saudi Arabia have started using digital currency for cross-border settlements which will be backed by fiat currencies of the 2 nations, Mubarak Rashid Al Mansouri, governor of the UAE Central Bank, said on Wednesday.

"The Central Bank in collaboration with Saudi Arabia Monetary Authority is undertaking a unique, joint project - leveraging on blockchain and cryptography - to issue a joint digital currency accepted in cross-border transactions between 2 countries. A distributed ledger Proof of Concept [PoC] to facilitate such cross-border settlements is already in put into motion. The PoC's design involves using digital currency backed by fiat currencies of the 2 nations," Al Mansouri said while addressing the Arab Fintex symposium in Abu Dhabi on Wednesday.

The governor said this is probably the first time the 2 countries witnessed cooperation on this policy front. "We hope the potential success of this initiative will foster similar collaboration in the GCC region and globally."

He said the digital currency would be used only for inter-banking channels.

Ahmed Al Kholifey, governor, Saudi Arabian Monetary Authority (Sama), recently told Al Eqtisadiah newspaper that the new digital currency would be introduced on a trial basis for 6 months and it will have no risks involved.

Al Mansouri revealed that the UAE central bank was working on a strategic plan to develop FinTech which would be supported by a legislative and regulatory framework.

"The Central Bank is developing a FinTech roadmap to cohesively deploy more balanced regulatory and development initiatives to ensure a healthy and sustainable FinTech ecosystem in the long term," he said.

The central bank is also in the midst of finalising crowdfunding regulations to provide more regulatory clarity for the operation of crowdfunding platforms.

He said there is a need for FinTech solutions that target unbanked segments of the population and also reduce cost of cross-border remittances.

The governor warned that financial consumers should not be a "laboratory mouse" as and when any new financial product or services are introduced. "We have a responsibility to ensure that potential risks are identified and measures to mitigate those risks are put in place," he said.


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