Aber: A new era of cross-border digital remittances

… with each other digitally, and to conduct financial remittances through the use of blockchains and distributed ledger technology, the statement said.

Aber: A new era of cross-border digital remittances

AuthorAuthor
Talat Zaki Hafiz
March 10, 2019 22:10

The Saudi Arabian Monetary Authority (SAMA) and the UAE Central Bank (UAECB) have announced in a joint statement the launch of their pilot project Aber, a common digital currency between the two countries. Its main objective is to enable banks in both countries to deal directly with each other digitally, and to conduct financial remittances through the use of blockchains and distributed ledger technology, the statement said.

Aber comes within the framework of the Azzam strategy, announced between Saudi Arabia and the UAE, to intensify bilateral cooperation in matters of mutual interest, among them financial services.

In the statement, SAMA and the UAECB expressed hope that Aber will be of local and international benefit. It is different from international digital systems such as Ubin and Jasper, launched by the Monetary Authority of Singapore (MAS) and the Central Bank of Canada respectively in 2016, in that the latter systems use digital remittances locally, not across borders.

Aber is still an experimental project, so it is too early to judge its benefits, but I believe it will have lots of positives, among them reducing banks’ heavy dependence on cash when making remittances, and reducing the cost of processing them.

It will also create jobs for Saudis and Emiratis in very specialized and advanced technological fields such as blockchains and distributed general ledgers. Moreover, it will improve transparency and efficiency, enabling banks and their customers to easily trace and track remittances executed between the two countries. Aber’s success could pave the way for similar joint projects between Saudi Arabia and the UAE.

Talat Zaki Hafiz is an economist and financial analyst.

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News’ point-of-view

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Saudi regulator launches regulatory sandbox to test fintech

… design of a sandbox regulatory environment that allows local and international financial technology firms to test new digital solutions as the kingdom …

The Saudi Arabian Monetary Authority (SAMA) has announced the start of the design of a sandbox regulatory environment that allows local and international financial technology firms to test new digital solutions as the kingdom pushes for economic transformation.

The move follows similar initiatives by other regulators in the GCC and aims to help the Saudi Arabian Monetary Authority understand and assess the impact of new technologies on the financial services market.

“Saudi has one of highest outflows of remittances in the region. Hence working on innovative ideas for cross border transfers, domestic payments, peer-to-peer lending for SMEs and other fintech ideas is a priority,” Mohamed Roushdy, head of technology at Dubai Asset Management, told Zawya.

“Saudi has one of highest outflows of remittances in the region. Hence working on innovative ideas for cross border transfers, domestic payments, peer-to-peer lending for SMEs and other fintech ideas is a priority”

“Sandbox could play a great role in getting those ideas to the market with the support of banks, which will be part of the sandbox next to fintechs,” he added.

Sama plans to transform the initiative into an “intelligent financial centre” that allows local and international companies to test digital solutions they intend to launch in the kingdom, the regulator said in a statement.

The list of permitted fintechs so far is comprised of Geidea, Bayan Payments Company Limited, HalalaH, Saudi Digital Payments Company (STC Pay), Saudi Post, Brightware, and Tap Payments, according to SAMA.

The sandbox environment will be linked to the kingdom’s Vision 2030, an overarching road map that aims to overhaul and diversify the country’s economy away from oil. The Financial Sector Development Program (FSDP), geared to transform and diversify the financial sector, and support national economy through financing and investment initiatives for private sector, are among the key pillars of Vision 2030.

Société Générale and several other banks are already eyeing opportunities that this economic transformation might bring.

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UAE said digital currency not being used for cross-border settlements with Saudi Arabia

“[It] will help CBUAE gain a deeper understanding of the feasibility of distributed ledger technology in this field and explore the potential opportunities …

The UAE’s Central Bank has denied media reports stating that the UAE and Saudi Arabia have begun using a digital currency for cross-border settlements.

In a clarification sent to media outlets, the CBUAE said that it is currently working with the Saudi Arabian Monetary Authority (SAMA) on a joint project “which constitutes a proof-of-concept (PoC) for experimenting with blockchain technology to facilitate cross-border payments between the two countries.”

The PoC, the statement said, is still in an early stage.

“[It] will help CBUAE gain a deeper understanding of the feasibility of distributed ledger technology in this field and explore the potential opportunities and benefits of a digital currency,” the statement said.

Both the CBUAE and SAMA have selected a tech company to support the implementation of the PoC, which is slated for Q4 2019.

Once completed, the outcome of the PoC will allow both countries to determine with a digital currency could be used in normal market operations between the two.

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UAE and Saudi Arabia trial cross-border payments on blockchain

UAE and Saudi Arabia trial cross-border payments on blockchain … a “deeper understanding of the feasibility” of distributed ledger technology (DLT) …

The UAE and Saudi Arabia have launched a proof of concept (PoC) for experimenting with blockchain to help cross-border payments between the two countries.

Ripple involved?

Ripple involved?

The Central Bank of the UAE (CBUAE) and the Saudi Arabian Monetary Authority (SAMA) are behind the new initiative.

Interestingly, CBUAE explains: “Some media have reported incorrectly that UAE and Saudi Arabia have started using digital currency for cross-border settlements which will be backed by fiat currencies of the two nations.”

Look on the bright side. At least a regulator reads the fintech news.

Anyway, that’s clear and CBUAE tells the world that the PoC is still at an early stage and will help it gain a “deeper understanding of the feasibility” of distributed ledger technology (DLT) in this field and “explore the potential opportunities and benefits of a digital currency”.

CBUAE and SAMA have selected an unnamed tech company (maybe Ripple? See below) to support the implementation of this PoC, which is expected to be completed in the last quarter of 2019.

The project started with initial knowledge transfer sessions, and is currently in the phase of business and technical requirements gathering.

Once completed, the outcome of this PoC will “determine whether a digital currency could be introduced in normal market operations between the two countries”.

In February, Ripple signed an agreement with SAMA to support the nation’s banks in a blockchain-fuelled payments pilot.

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Saudi Arabia Will Launch Its Own Cryptocurrency in 2019

Ripple, the company developing xRapid and the XRP asset, has begun making inroads in Saudi Arabia. The country’s National Commercial Bank is a …

Various countries mull creating their own cryptocurrencies. That is not an easy feat, as many different aspects need to be considered. In Saudi Arabia, such a new currency will be finalized in mid-2019. This currency will have the backing of the Saudi central bank. Despite this timeline, the working group behind this project is still evaluating the potential impact of such a currency.


Saudi Arabia and Digital Currency

The success of Bitcoin hasn’t gone by unnoticed. Despite falling prices, the currency highlights some interesting potential. Digital cash is something a lot of consumers and corporations seem to favor at this time. This means governments and central banks need to cater to this demand. Creating a native cryptocurrency seems to fit this will quite well in that regard.

In Saudi Arabia, such a currency is being developed. It is a venture between the country itself and the United Arab Emirates. Not too much is known about the currency at this time. It has no official name, and its potential success remains unclear. The Saudi Arabian Monetary Authority is still investigating the feasibility of such a currency. Transforming finance in Saudi Arabia will not be without potential risks.

It is expected this new currency will come to market in mid-2019. More importantly, it will be supported by a limited number of banks. The central bank of Saudi Arabia wants to improve upon cross-border payments. Which banks will support this currency from day one, has not been officially communicated as of yet. This somewhat cautious approach to digital currency shows a lot of questions remain unanswered.

Saudi Arabia and Digital Currency

Other Countries Remain Hesitant

It is not the first time a country mulls creating a native cryptocurrency. To date, none of those regions have put any plans in motion to do so. It appears Saudi Arabia is leading the pack in terms of exploring the opportunities. Making cross-border payments more efficient is a worthy goal. It is something that can benefit consumers and corporations alike.

This news comes at a bit of an odd time. Ripple, the company developing xRapid and the XRP asset, has begun making inroads in Saudi Arabia. The country’s National Commercial Bank is a member of RippleNet. This move is also part of streamlining cross-border payments to and from the Kingdom. Additionally, the Saudi Arabian Monetary Authority conducted a Ripple-oriented pilot earlier in 2018.

Putting all of one’s eggs in the same basket is never a smart idea. Diversification is key, especially in the financial industry. For banks, exploring different technologies and implementations will often yield the best results. This also confirms Ripple and a central bank-issued digital currency can potentially co-exist in the same country.

Do you think more countries will begin to consider issuing national cryptocurrencies? Let us know in the comments below.


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