- Project Aims to cut payment costs
- Begins trial of the Central Bank Issued Digital Currency, “Aber”
- Aber to be restricted to select banks at the start
The central banks of Saudi Arabia and the United Arab Emirates (UAE) have agreed to introduce a common digital currency known as the “Aber”. In a joint statement published on Tuesday, Jan. 29, the Saudi Arabian Monetary Authority (SAMA) and the United Arab Emirates Central Bank (UAECB) announced that they have begun the trial of the project which will leverage blockchain and DLTs to facilitate financial settlements between their countries.
The statement read:
“…one of the objectives of launching the common digital currency project “Aber” is for use in financial settlements between the Kingdom of Saudi Arabia and UAE through Blockchains and Distributed Ledgers technologies.”
This comes after recent meetings between the apex banks. As Smartereum reported, last week both central banks agreed on seven initiatives which will be carried out by both nation one of which is the Saudi-Emirati Digital Currency. The executive committee of the Saudi-Emirati Coordination Council had their first meeting on the 17th of January after which it releases a statement which read:
“The digital currency relies on the use of a distributed database between the central banks and the participating banks from both sides. It seeks to safeguard the interest of customers, assess cybersecurity and set technology standards. The project will also determine the effect of a centralized currency on monetary policy.”
Previous Blockchain and Cryptocurrency Efforts
As separate entities, the nations have explored blockchain solutions for their individual financial industries in the past. Last December, Smartereum reported that the UAE Advisory Council recommended the use of blockchain in banks making reference to a blockchain study which revealed the benefits of the technology to the banking sector. In his presentation, the chairperson of the committee Aref Al Ramli explained that blockchain helped in compliance reporting, cross-border payments, customer onboarding and other areas of banking operations.
The prime minister of the UAE His Highness Sheikh Mohammed had in April of last year unveiled the nation’s blockchain blueprint tagged “UAE Blockchain Strategy 2021”. The blueprint reveals the nation’s plans to adopt blockchain technology in government as well as sectors of its economy.
For its part, the Saudi central bank SAMA entered a first-of-its-kind partnership with blockchain company Ripple in the first quarter of last year. The agreement saw SAMA pilot Ripple’s blockchain-based payment settlement solution x-Current and help Saudi banks completely change how they send money across borders with instant payments.
Details and Benefits of the Common Digital Currency
According to the Tuesday’s announcement, the central remittance systems in both countries have “evolved over time and proved their feasibility.” It stated that the partnership and digital currency will address some aspects of international remittances that still needs development.
Besides the digital currency, the committee said it may include a blockchain-based reserve system in place for domestic central payments settlement.
The project which is in the proof-of-concept stage will first focus on testing the technical aspects and will be restricted to select banks in each country. “[If] no technical obstacles are encountered,” the statement noted that “economic and legal requirements for future uses will be considered.”