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UAE, Saudi Arabian central banks launch common digital currency called 'Aber'

The central banks of the United Arab Emirates and Saudi Arabia have launched a common digital currency called Aber, which will be used in financial settlements between the two countries through Blockchains and Distributed Ledgers technologies.

Jan 30, 2019 15:37 IST
UAE, Saudi Arabian central banks launch common digital currency called 'Aber'

The central banks of the United Arab Emirates (UAE) and Saudi Arabia have launched a common digital currency called ‘Aber’, which will be used in financial settlements between the two countries through Blockchains and Distributed Ledgers technologies.

The UAE central bank said in a statement that it will establish an additional means for the central financial transfer systems of the two countries and enable banks to directly deal with each other in conducting financial remittances.

Objective

The key objective of the pilot project is studying the practical application of modern technologies and determining their impact on the reduction of remittance costs and assessment of technical risks and how to deal with them.

Key Highlights

For the implementation of Aber project, the two countries have emphasised that concentration in the initial stages will be on technical aspects.

The use of the currency will be restricted to a limited number of banks in each state.

In case that no technical obstacles are encountered, economic and legal requirements for future uses will be considered.

The central bank-based digital currency will make cross-border financial transactions more secure and financially efficient.

SAMA and the Central Bank of UAE share the same desire to launch pilot projects in the use of Blockchain and Distributed Ledgers technologies to identify them and learn how to benefit from them.

Cooperation between UAE, Saudi Arabia

The UAE’s central bank and SAMA hope that their pilot projects will benefit everyone locally and internationally.

Based on this desire, the two countries do not only aspire to be the forerunners in the application of modern technologies, but also in their adaptation, development and delivery to the world.

Hence, the two countries embarked on carrying out the experiment of issuing a common digital currency for use across borders to carry out remittances.

Significance

The agreement to launch this project jointly rather than independently in each country can be attributed to the fact that the two countries have in place central systems for remittances and domestic transactions which have evolved over time and proved their feasibility.

However, there are still some aspects of international remittances that need further development. It may be proved after study that the use of digital currency may contribute to supporting this development.

 The project will also enable considering the possibility of using the system as an additional reserve system for domestic central payments settlement system in case of their disruption for any reason.

Background

The central banks of some countries have already begun pilot projects to explore the dimensions of Blockchain and distributed ledger technologies in the circulation of digital currencies.

The countries that have already begun working on the pilot project include Sweden, Bahamas, Uruguay and Russia.

Besides this, a large number of companies in the UAE are increasingly embracing new technologies such as Blockchain, Artificial Intelligence, Internet of Things, in line with the Fourth Industrial Revolution that is reshaping governments and corporates around the world.

The Abu Dhabi Global Market has also been aggressively working on a framework to regulate spot crypto asset activities.