Saudi Arabia and even the United Arab Emirates have confirmed that a typical digital currency is in the process of being launched.
The move was announced in a joint statement released earlier today by the Saudi Arabian Monetary Authority (SAMA) and the Central Bank of the United Arab Emirates (UAECB).
This isn’t the first occasion that this type of project continues to be mentioned. Gulf News reported onto it back in December 2018. At the time, it had been described by Mubarak Rashed Al Mansouri – CEO from the Emirates Investment Authority – as a “study between UAE and Saudi [Arabia]”, adding that they not “gone deeper in it”.
At that stage, Al Mansouri was enthusiastic in the consideration of distributed ledger-based technologies once regulated:
“Crowdfunding platforms and blockchain technologies are a very good example. Crowdfunding platforms, for instance, have gained widespread attention and growth within the previous few years. At the central bank from the UAE, we started developing regulations in connection with this in 2016 so as to safeguard the economic climate and protect consumers, this project reaches a final stage.”
It appears today the project has managed to move on quite a bit having a framework being established. That framework is referred to as being ‘proof of concept’ based. Its purpose is to "study the length and feasibility of modern technologies through practical application and also to determine their impact on the improvement and reduction of the cost of remittances, as well as the assessment of technical risks and how to deal with them."
At this time, the emphasis is on the technological issues resulting from the proposed implementation. In the case that no technological hurdles are found, the economic and legal conditions for the potential users will be discussed. The Declaration recognizes that current cross-border and cross-currency transfer structures have proved their value in terms of stability. However, additionally, it suggests that there are certain facets of international remittances that may be improved upon.
The statement also alludes towards the digital currency getting the potential to behave as an additional reserve system for domestic central payments in the big event that existing methods are ever susceptible to disruption.
In certain techniques, the suggested digital currency is equivalent to current or planned state-backed cryptocurrencies. The first nation to create its own cryptocurrency was Venezuela. It seems as if Iran, which could start as soon as this week, is likely to follow suit.
In the situation of Saudi Arabia, Venezuela, and Iran, not one of them has been particularly crypto-friendly. Venezuela’s cryptocurrency – the Petro – has been continually promoted by its government but not when it comes to everyday use through the people. Iran had taken a tough line against decentralized cryptocurrencies for example Bitcoin. That dissipated somewhat because the country considered a situation-backed cryptocurrency recently. However, based on a draft report obtained by Coindesk, it appears the country is placed to ban ‘unapproved’ cryptocurrencies when it comes to their use for the objective of payments inside the Persian Gulf country.
Likewise, Saudi Prince Alaweed bin Talal – thought to be one of the world's most influential people – has expressed his disapproval regarding Bitcoin. In a job interview with CNBC’s Squawk Box in 2017, he stated:
“[Bitcoin] just doesn’t make sense at all. This thing isn’t regulated, it’s not in check, it’s not underneath the supervision [of any central bank].”
These kinds of state-controlled cryptocurrencies don't fulfill the promise of blockchain technology for crypto purists. The motive varies, however, in cases like this at least. In Iran and Venezuela's case, their motivation will be to circumvent sanctions. In the situation of this ‘Aber’ project, the objective would be to realize further efficiencies in the region of international settlement and remittances. Whilst it’s certainly not the aim, these projects may play some small part – indirectly – in furthering the spread and adoption of cryptocurrency generally.