Saudi Arabia announced plans on Wednesday to issue a digital currency, according to local media news reports of a press conference.
Ahmed Alkholifey, governor of the Saudi Arabian Monetary Authority (SAMA), said they are undertaking a pilot to issue digital currencies to keep up with the latest technologies and practices.
The new currency will be of the same value as the current one, maintained under the supervision of SAMA and restricted to inter-bank transfers only.
After the conclusion of the pilot, SAMA will study the possible expansion of the digital currency if the results are shown to be beneficial.
Shoaib Abedi, executive director in ICM Capital, tells local media that a digital currency has numerous benefit, stating:
“The reduction of issuance costs, ease of transport, the lower costs for protecting it, and etc, are the most advantages of using the digital currency”
Saudi Arabia’s central bank governor stated they were studying the implementation of a digital currency for buying products, but due to the absence of a legal framework for digital currencies there may be risks and potential consequences.
Some media is calling the new currency a cryptocurrency, with most using bitcoin as the lead image, but details are very sparse at this stage.
Saudi Arabia’s neighbor, Dubai, recently signed an agreement to develop a blockchain based digital currency, called emCash, as we reported last week.
That new “encrypted digital currency” will be based on the latest blockchain technology, Dubai’s Department for the Economy said. Which in effect seemingly translates to a state issued digital currency, an implementation that would be a world first.
Saudi Arabia is trying to keep up with these developments to ascertain whether a digital currency would bring significant benefits to their national economy.
Analysts appear to think so, with Abedi stating that the introduction of a digital currency will allow SAMA to more easily follow national economic performance while reducing the underground economy.
The central bank, however, is seemingly currently limiting it to only transactions between banks, thus any benefit might likewise be limited.
In contrast, Dubai is to open the new digital currency to all citizens, allowing them to access it through a government developed app called emPay.