Saudi Arabian and Emirati central banks are to formally launch a trial of an in-house cross-border digital currency payment system, a year after the plan was first mooted. The Saudi Arabian Monetary Authority (SAMA) and the United Arab Emirates Central Bank (UAECB) announced Tuesday that the joint project is aimed at facilitating blockchain-based financial settlements between the two countries, in a bid to see whether using digital currencies presents enough benefits over traditional currencies to warrant further exploration.
A Year in the Making
The project was first announced in December 2017 and after a year of preparations it seems that the trial is ready to begin. The currency to be used for the test, Aber, is a new coin created especially for the purpose and will be restricted for trial use only, at least for the time being. The trial will also examine whether the blockchain payment system can act as an “additional reserve” for domestic payments. The initial stages of the project will focus on the technical performance of the blockchain, and if no such hurdles are encountered, the two institutions state that “economic and legal requirements for future uses will be considered.”
Blockchain Put to the Test
The pilot, the first of its kind, represents an exciting development for blockchain technology and an opportunity for it to live up to one of its biggest use cases – remittances. Facebook announced in December that it was planning to test the use of cryptocurrency in remittances within its WhatsApp platform, citing the potential for customers to enjoy much lower fees and instant payment. However, TransferWise chairman Taavet Hinrikus stated last year that no cryptocurrencies had yet come close to matching the performance of existing technology in transferring money. He also claimed that there was no certainty that blockchain solutions would be any better or cheaper than those being worked on by traditional fintech enterprises.