It was reported that the United Arab Emirates (UAE) is collaborating with Saudi Arabia’s central bank in order to develop a digital currency that would be utilized in cross-border transaction solutions between the two countries.
Mubarak Rashid Al-Mansouri, the United Arab Emirates (UAE) Central Bank governor, explained that the digital currency will be blockchain-based and will be built upon the distributed ledger technology (DLT), which would allow timely distribution of synchronized data. The project was announced in a statement after the Arab Monetary Fund (AMF) meeting.
However, Mr. Al-Mansouri mentioned that the United Arab Emirates-Saudi digital currency would only be used among banks and is not intended to be used by individual consumers. He explained that the aim of this initiative is to make transactions more efficient between the two territories.
This suggests that the financial institutions want to analyze, assess, and understand blockchain technology in a better manner.
“It is the digitization of what we do already between central banks and banks,” Mr. Al-Mansouri stated. “This is the first times the monetary authorities of two countries cooperation [sic] to use blockchain technology,” he said.
It was further explained that the planned digital currency is still going through its initial study and that no specific date has been set as of yet for its launch.
Similar attempts were made in the past, for conventional currency
The United Arab Emirates and Saudi Arabia had earlier discussed the development of a single currency that was to be used among members of the GCC; however, the United Arab Emirates had pulled out of the project in 2009.
That being said, diplomatic relations between the two countries have been strengthening further as of late. The UAE had also mentioned last week that it planned to establish a committee with Saudi Arabia, which would focus on economic, military, and political issues.
What it could mean for the cryptocurrency world
While there have been numerous developments from the private sector in the UAE on the cryptocurrency and blockchain front, this particular move is significant because it marks the first time that the central banks – the countries integral financial institutions – have expressed their interest in not just understanding the technology, but to take their understanding to the next level by launching their own digital currency.
While this planned digital currency is only aimed between the financial institutions for now and will not be available to the public unlike Bitcoin, it could very well open doors for the region to be more accepting of the usage of established cryptocurrencies.
It could be a positive aspect for the cryptocurrency community, as the more these official institutions familiarize themselves with the concept and working mechanism of digital currencies, the more it would help them shake off the stigma that comes with the usage of these methodologies.