Saudi Arabia and the United Arab Emirates have unveiled the first of its kind pilot cryptocurrency cross border initiative. This new project is part of the Saudi-Emirati Coordination Council. And there is no doubt that this will also boost investor confidence in cryptocurrencies.
The official statement says that the pilot cryptocurrency project focuses on cross border payments and transactions. “The project will be strictly targeted for banks at an experimental phase with the aim of better understanding of the implications of Blockchain technology and facilitating cross-border payments.” Both countries seek to establish technology standards and assess cybersecurity risks. Experts say Saudi Arabia is also working towards adopting blockchain technology to strengthen the supply chain.
As more countries are looking to establish cryptocurrencies for cross border payments, financial institutions are trying to catch up. The Bank Policy Institute says advances in consumer peer-to-peer payments and the proliferation of pilot programs using blockchain technology are pressuring incumbent banks and traditional money-transfer operators to develop and improve their offerings. The Institute says “most cross-border payments are still routed via bilateral correspondent banking relationships, a network of banks that use the SWIFT messaging protocol to execute transactions. But there are some glitches such as pricing and foreign exchange rates are not finalized until the funds actually arrive in the recipient’s account. “The need to rely on multiple banks causes uncertainty about timing, accuracy and transfer status. And the sender and receiver must have an active bank account.”
Banks are making efforts to adopt faster payment technologies. The Bank Policy Institute says as the move towards faster payment technologies gains momentum, the desire for systems interoperability and integration to enable real-time cross-border payments will grow. And this is already happening.