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

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, allied nations extend nearly 10M barrel cut by a month

Updated 5 min 43 sec ago

OPEC, allied nations extend nearly 10M barrel cut by a month

  • The meeting, originally scheduled for next week, was brought forward to Saturday

VIENNA: OPEC and allied nations agreed on Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to boost energy prices hard-hit by the coronavirus pandemic.
Ministers of the group and outside nations like Russia met via video conference to adopt the measure, aimed at cutting out the excess production depressing prices as global aviation remains largely grounded due to the pandemic. It represents some 10% of the world's overall supply.
However, danger still lurks for the market. Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.
“Despite the progress to date, we cannot afford to rest on our laurels,” Arkab said. “The challenges we face remain daunting.”
That was a message echoed by Saudi Arabia's Oil Minister Abdul Aziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when US oil futures plunged below zero.


“There are encouraging signs we are over the worst,” he said.
Russian Energy Minister Alexander Novak similarly called April “the worst month in history” for the global oil market.
The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision and a collective effort deserving praise from all participating producing countries.”
OPEC has 13 member states, including Saudi Arabia. The additional countries part of the plus-accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.
Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.
The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March. Analysts say Russia refused to back even a moderate cut because it would have only served to help US energy companies that were pumping at full capacity. Stalling would hurt American shale-oil producers and protect market share.
Prices collapsed as the coronavirus and the COVID-19 illness it causes largely halted global travel. That also hurt US shale production, drawing the ire of President Donald Trump. But Trump welcomed the earlier deal, as US Energy Secretary Dan Brouillette did on Saturday with the extension.
“I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world,” Brouillette wrote on Twitter.
Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.
However, some countries produced beyond their quotas set by the deal. One of them was Iraq, which remains decimated after the yearslong war against the Islamic State group.
On Saturday, Iraq Oil Ministry spokesman Assem Jihad said in statement that Baghdad had “renewed its full commitment” to the OPEC+ deal.
“Despite the economic and financial circumstances that Iraq is facing, the country remains committed to the agreement," Jihad said.
Analysts had expected OPEC and the other nations to extend the cuts of 10 million barrels per day by one more month, but not longer, since the level of demand is still fluctuating.
“If the demand is great, countries like Russia will want to produce more oil, so they probably won’t want to get locked into a longer-term deal that may not help them,” said Jacques Rousseau, managing director at Clearview Energy Partners.