Apart from cryptocurrency development, the rest of the plan includes a sort of customs union, which allows Saudi and Emirati small and medium-sized enterprises to bid for procurement contracts in both countries, financial literacy for children, and disabled access in airports, to name a few cross-border goods and services that are getting favorable treatment.
The cryptocurrency pilot will be experimental and strictly targeted at banks with the aim of better understanding the implications of blockchain technology while facilitating cross-border payments, state news agency Wam reported.
As part of their co-operative plan, the cryptocurrency will rely on the use of a distributed database between the central banks and participating banks from both sides. It will seek to safeguard customer interests, set technology standards, and assess cybersecurity risks within the Arab co-operative.
It was stated by the news agency that this is a first-of-its-kind joint cryptocurrency launch, especially in regards to the parties launching the digital currency being national governments. Other countries have attempted to launch their own cryptocurrencies, such as Venezuela and its oil-backed Petro, as well as another Arab country, Iran, which claims to be coming close.
Iran has reportedly been flirting with launching its government-backed cryptocurrency in an attempt to bypass sanctions imposed by the USA. It’s uncertain whether the Saudi and Emirati cryptocurrency will be resource backed or free-floating.
The details surrounding the Rial-back cryptocurrency were revealed by Informatics Services Corporation (ISC), which is affiliated with Central Bank of Iran. The coin will reportedly be based on Hyperledger Fabric which the Central Bank of the country will issue it.
With the UAE and Saudi Arabia now entering into the cryptocurrency space with their governmental pilot program, it is interesting to note the growth of the digital currency space within the Middle East, as well as its potential uses for nations wishing to leverage the technology.
Iran is looking to bypass sanctions, but the UAE and Saudi Arabia are more interested in growing their cooperation through the use of digital currencies, which can be applied, for now, to cross border payments between the two countries.
Should this pilot be successful, it would be an interesting precedent for other state unions to examine how cryptocurrency can facilitate financial cooperation between ally governments.