Saudi Arabia and the United Arab Emirates have announced they will be undertaking joint tests on a new co-developed cryptocurrency dubbed Aber.
The two countries are looking to leverage blockchain and distributed ledger technology to bring down cross-border remittance and transaction costs. The move will also foster greater economic cooperation. The network will be used to settle financial transactions between the two nations.
The announcement was made via a joint statement published on the Saudi Arabian Monetary Authority (SAMA) website. Both the Saudi Arabian Monetary Authority and the United Arab Emirates Central Bank (UAECB) have expressed their commitment to make the project a forerunner in the industry.
The network is also set to serve as an auxiliary system to the current local central payments setup. It could supplement the existing structure in case of an outage.
According to the disclosure, only a few banks in the respective countries will be able to use the system in its pilot stage. Further development will allow for the inclusion of more banks. The project is just one among many that the two countries have agreed to co-develop in order to achieve greater cooperation, especially in areas of mutual interest such as finance and services.
The new cryptocurrency is expected to lead to greater adaptation of blockchain technologies and cryptocurrencies in the region. More crypto-friendly legislations are also bound to be enacted to accommodate the sector.
Two Countries with Conflicting Crypto Policies
Saudi Arabia Crypto Policies
The Saudi Arabia government has consistently been averse to cryptocurrencies, and its policies affirm its stance. According to the latest round of policies constituted by the Saudi Arabian Monetary Authority, citizens and businesses in the jurisdiction are barred from trading in cryptocurrencies. Just a few months ago, the administration reinforced its stance on the issue.
This was after deceptive crypto adverts were reported. They falsely claimed to have authorization from the agency to undertake crypto trading activities in the country. This was in an attempt to inveigle investors.
A committee whose membership included representatives from the Capital Market Authority, the Ministry of Trade and Investment, Ministry of Information, and the Saudi Arabian Monetary Agency (SAMA) was convened to deal with the issue and related matters.
The committee was tasked with enforcing the ban. Its mandate is outlined as follows, according to a statement released by SAMA.
“As required by the supreme decree, the standing committee works with relevant parties in order to reduce marketing for investment and trading in Forex and virtual currencies by reporting on SAMA or CMA official websites.”
According to SAMA, no cryptocurrency trading licenses have yet been issued.
The UAE Hopes to Become a Leading Crypto Destination
Unlike Saudi Arabia, the United Arab Emirates has been taking noteworthy steps towards becoming a leading crypto center in a few years time. They are in line with the Emirates Blockchain Strategy 2021 which was unveiled in April last year.
The strategy was designed to push the UAE into becoming the first fully crypto powered city in the world by 2020. Among its aims is to ensure that at least 50 percent of all government transactions are executed on the blockchain by 2021.
ICO Regulations are set to be finalized by June 2019. Setting up ICO legislation is a major step towards encouraging tokenized startups to set up base in the country.
Filling in the ICO Void Left by Larger Economies
Leading economies across the world, including the United States and China, have strict regulations governing the launch of ICOs. China has outrightly banned ICOs.
The Chinese government perceives cryptocurrencies to be incredibly capricious in general and considers ICOs to be rife with risks which may have a domino effect on the larger economy if left unbridled. The administration also harbors concerns about capital flight facilitated by the issuance of tokens.
In the United States, the Securities and Exchange Commission (SEC) lists ICOs as securities and so they fall under its jurisdiction. Categorizing them as such requires that parties involved in ICO projects comply with the agency’s stringent requirements.
Based on the classification of securities, limitations are placed on who can invest in them. Exemptions for the securities classification can be made if only foreign investors are involved or In cases where tokens are exclusively sold to accredited investors.
Failure to follow SEC guidelines can lead to hefty fines running into millions of dollars. Additionally, companies found to be in violation of the statutes are required to reimburse investors if found guilty of non-compliance. The AriseBank case in which its $600 million ICO got flagged by the SEC highlights the repercussions. The company received a $2.7 million penalty.
Crypto Startups Setting Up Shop in the UAE
A few crypto exchanges have already set up base in Dubai in recent months, thanks to the UAE’s encouraging policies. The Crypto Bulls Exchange was the first cryptocurrency exchange platform to be registered in the country. The platform was unveiled in October and began operations in November. It is a joint project between the Al Zarooni Group and Crypto Bulls.
Bitex is also among the latest crypto companies to set up shop in the UAE. Its service portfolio includes bank transfer and cash deposits. According to Monark Modi, the CEO of Bitex UAE, the company offers tremendous convenience for crypto users located in the jurisdiction.
He explained that although UAE citizens are able to use foreign exchanges to make withdrawals, the process is convoluted and in most cases requires converting digital currencies into a more widely accepted fiat currency such as the USD before exchanging the money for Dirhams.
By joining the list of countries currently supporting the growth and development of the cryptocurrency industry, the UAE stands to benefit greatly as a regional crypto destination. Notable benefits will include increased foreign investments and the development of a bevy of supporting industries.
(Featured Image: Pixabay)
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