Saudi Arabia, UAE poised to launch digital currency

Although there is much skepticism around bitcoin, the underlying blockchain technology is viewed as a groundbreaking system. (Reuters)
Updated 14 December 2017
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Saudi Arabia, UAE poised to launch digital currency

LONDON: Saudi Arabia and the UAE are working on the launch of a digital currency that could be used for transactions between the region’s banks by using blockchain, the technology that underpins bitcoin.
Citing UAE Central Bank Gov. Mubarak Al-Mansouri, Reuters reported on Wednesday that UAE and KSA banks would issue a digital currency that would be accepted in cross-border transactions between the two countries.
In a speech to a regional financial conference, Al-Mansouri explained that blockchain is a shared ledger of transactions, maintained by a network of computers on the Internet rather than by a central authority.
Although there is official skepticism around bitcoin, blockchain is viewed as a groundbreaking system with huge potential for saving time and costs for businesses and financial services.
Arab News recently reported that banks around the world were looking to create digital versions of their currencies. Unlike bitcoin, these digital currencies would be backed by the monetary authorities and could one day replace cash.
James Bernard, development director of the Dubai Multi Commodities Center (DMCC), told Arab News that a clear distinction should be made between blockchain, which offers huge potential, and cryptocurrencies that have faced hacking issues and massive swings in value. “Bitcoin is dependent on blockchain, but the blockchain technology is independent of bitcoin,” Bernard said.
The KSA and UAE central banks have in the past expressed skepticism about bitcoin, with the UAE Central Bank saying it did not recognize it as an official currency.
In July, the Saudi central bank warned against trading bitcoin because it was outside the bank’s regulatory reach.
On Wednesday, however, Al-Mansouri said the central banks wanted to understand blockchain technology better. He told reporters that the UAE-Saudi digital currency would be used among banks, not by individual consumers, and would make transactions more efficient.
“It is digitization of what we do already between central banks and banks,” he said.
At a panel discussion on banking and blockchain during November’s Global Financial Forum — hosted by the Dubai International Financial Center — speakers agreed that blockchain was in its early stages and had many years before going mainstream, but all agreed the potential was massive.
Leanne Kemp, CEO of Everledger, told the forum that banks could benefit from the immutable track-and-trace application of blockchain, which helps enhance trust and security.
Brian Behlendorf, executive director at Hyperledger, explained that there are two different types of blockchain: Permissioned and permission-less, with the latter used by bitcoin.
Behlendorf said he believed the potential benefits of the permissioned blockchain makes it attractive to financial institutions and other enterprises.
At the end of 2016, the Royal Mint of the UK announced plans to launch a digital gold product called Royal Mint Gold (RMG), a joint venture with US exchange, CME. A spokesman told Arab News earlier the system is now “up and running” and the Royal Mint is “in advanced discussions to sign up a number of corporate users.”
“By using distributed ledger technology, we can make it more cost-effective and provide increased transparency for traders and investors to trade, execute and settle gold,” said the Royal Mint.
A decade ago, the UAE and Saudi Arabia discussed the possibility of creating a single currency among members of the six-nation Gulf Cooperation Council but the UAE pulled out of the project in 2009.
However, diplomatic and economic ties between the UAE and Saudi Arabia have been strengthening this year, and last week the UAE said it planned to establish a bilateral committee with Saudi Arabia on economic, political and military issues.
 


OPEC rift deepens as Iran walks out of key meeting in Vienna

Updated 21 min 25 sec ago
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OPEC rift deepens as Iran walks out of key meeting in Vienna

VIENNA: Iran's oil minister walked out of a key meeting with OPEC peers on Thursday, as a rift deepened with regional rival Saudi over its push to ramp up the cartel's oil output.
"I do not think we can reach an agreement," Bijan Namdar Zanganeh told reporters at his Vienna hotel after storming out of talks with a group of ministers on the eve of a crucial OPEC meet.
The talks were meant to lay the groundwork for Friday's gathering of the 14-nation Organization of Petroleum Exporting Countries (OPEC), when the cartel will discuss easing a supply-cut deal with 10 partner countries that has cleared a global oil supply glut and pushed crude prices to multi-year highs.
The output curbs have been in place since January 2017 but Saudi Arabia, backed by non-member Russia, is now pushing to raise production again in order to meet growing demand in the second half of 2018.
But the proposal has run into resistance from Iran, Iraq and Venezuela, who would struggle to immediately raise output and fear losing market share and revenues if other countries open the spigots.
Iran is particularly vocal about its objections as it braces for the impact of fresh US sanctions on its oil exports after President Donald Trump quit the international nuclear agreement.
But Riyadh, which cheered Washington's exit from the nuclear pact, is under pressure from Trump to boost output in order to lower oil prices ahead of November's midterm elections.
Saudi Energy Minister Khalid al-Falih had earlier signalled a compromise could be in the works.
He acknowledged that a big production hike might be "politically unacceptable" to some OPEC countries and said it was important to be "sensitive" to those concerns.
The 24 nations in the pact, known as OPEC+, initially agreed to trim production by 1.8 million barrels a day but they have actually been keeping more than two million bpd off the market.
Observers believe a face-saving deal could be brokered if members simply stopped over-complying with the current pact, and agreed to stick to the original reduction quotas -- which would bring several hundred thousand more barrels to the market each day.
But that is easier said than done since much of the shortfall has come from Venezuela, where an economic crisis has savaged the nation's petroleum production.
Output has also plummeted in Libya, where fighting between rival factions has damaged key oil infrastructure.