A major payments provider in the United Arab Emirates (UAE) is implementing blockchain-based systems to operate remittance facilities, while the country’s government is discussing the creation of a state-backed cryptocurrency in partnership with Saudi Arabia, as per two reports in the week of December 11, 2018.
RippleNet Technology to Be Deployed
Continuing its strong onboarding performance in the Middle East and Asia, U.S. startup Ripple has signed an understanding with Abu Dhabi-based UAE Exchange to launch cross-border remittances via the former’s enterprise-grade RippleNet blockchain, as reported by Reuters.
Asia receives over $613 billion each year in remittances, with a large chunk coming from expat workers in the Middle East. The latter region is dominated by foreign exchange and payments company Finablr, a local subsidiary to UAE Exchange. While most funds are currently sent through foreign exchange branches, websites, and mobile apps, the company intends to deploy blockchain technology for ensuring a safer, faster, and more secure payment process.
UAE Exchange expects to go live with Ripple as early as Q1 2019, “with one or two Asian banks” expected to begin accepting blockchain-based remittances.
RippleNet has more than a hundred partner banks and financial institutions, enabling messaging, payments, clearing of securities, and quick settlement of transactions across all members. The most prominent institutions include lenders National Bank of Ras Al Khaimah, Kuwait Finance House, and the local arm of global bank Standard Chartered.
CBDC for Cross-Border Payments
In another development, the Central Bank of UAE is undertaking a joint project with the Saudi Arabian Monetary Authority to issue a blockchain-based digital currency to enable swift transactions between the two borders reported Gulf Times.
Chief Executive Officer of Emirates Investment Authority, Mubarak Rashed Al Mansouri, spoke of the development:
“This is probably the first time ever that witnesses the cooperation of monetary authorities from different countries on this topic and we hope that this achievement will foster similar collaboration in our region.”
However, Al Mansouri was quick to note that the proposal exists in its research and study stages, with both parties yet to dive deep into the concept. The study is also presumably worked upon by a large group of officials and researchers, with no information of the final team leading the project and the total costs associated with the project available at the time of writing.
Al Mansouri added that the digital currency will strictly be available for use between banks of the two countries, stating, “this would be more efficient…This is between us and the banks.”
Both the central banks of UAE and Saudi Arabia have called out bitcoin and other cryptocurrencies previously, condemning the pioneer cryptocurrency’s price volatility and risks. However, the narrative may change if officials were to understand blockchain technology and its myriad benefits.
Al Mansouri also noted that essential developments in the fintech sector present both a unique opportunity and challenge to understand the risks involved. Both industry players and market participants must cooperate to determine the best way to mitigate risks and enhance the industry.