The UAE and Saudi Arabia are teaming up to create a cryptocurrency for cross-border transactions.
The adoption of cryptocurrency in the Muslim world and – in particular – the Middle East, has been the subject of heated debate over the last few months. This week, however, it seems as though two of the most influential and powerful entities in the region have taken steps towards validating the technology and its place in regional and international monetary framework.
Well, validating the utility of the technology, that is.
A Multi-National Banking Cryptocurrency
On December 13, 2017, reports hit the press that two of the middle eastern superpowers, are teaming up to create and issue a digital currency. The two powers in question are the United Arab Emirates and Saudi Arabia and, specifically, it will be the central bank of each that get together and build out the framework for the issue.
According to reports, the digital currency to be created will be based on blockchain technology (hence our argument that the move goes some way to validate cryptocurrency) and it’s designed, primarily, as a tool that can facilitate cross-border transactions between the two countries.
The UAE and Saudi Arabia already have a very well established and large-scale import/export relationship with one another. Saudi Arabia exports to the UAE total $6.74 billion annually, with the reverse figure (exports from the UAE to Saudi Arabia) total $8.5 billion.
The friction created when using cash, even digital cash, as a transaction method has long been an issue with cross-border payments and, when aggregate volume totals tops $15.2 billion annually, these frictions amplify. As such, the transfer to a blockchain based cryptocurrency makes sense – even in a region that has, to date, been somewhat unsupportive of the technology.
Here’s what Mubarak Rashed al-Mansouri, the governor of the Central Bank of the UAE, had to say on the development:
This is the first times the monetary authorities of two countries cooperation to use blockchain technology… It is digitization of what we do already between central banks and banks [sic].
How this will impact the use of cryptocurrency by individuals within these regions remains to be seen. As things stand, the development relates only to central bank transactions. Over time, however, a relaxed governmental attitude towards cryptocurrency could filter through to the general public.
What are your views? Could these sorts of cross-border mechanisms benefit other, similar international trade relationships? Let us know!
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