UAE, Saudi Arabia start work on fintech for cross-border settlements

FILE PHOTO: Tourist take photos of a mosque across the Dubai Marina, surrounded by high towers of hotels, banks and office buildings, in Dubai, United Arab Emirates December 11, 2017. REUTERS/Amr Abdallah Dalsh

DUBAI (Reuters) - The United Arab Emirates and Saudi Arabia have started developing fintech for cross-border settlements, including a digital currency project, the UAE’s central bank governor said on Wednesday.

Mubarak Rashed al-Mansouri, speaking at a financial technology conference in Abu Dhabi, also said the UAE central bank was working on a strategic plan to develop fintech which would be supported by a legislative and regulatory framework.

Mansouri said fintech could play a major role in improving financial inclusion -- the provision of affordable financial services across the economy -- and noted that the legal mandate of the central bank now included fostering financial inclusion.

For the joint digital currency, the UAE and Saudi central banks have launched a distributed ledger “proof of concept” system to facilitate cross-border settlements, he said. The digital currency would be backed by fiat currencies of the two nations.

“We hope that the potential success of this initiative will foster similar collaboration in the GCC (Gulf Cooperation Council) region and globally,” Mansouri said.

The proof of concept is still at an early stage but the two central banks have chosen a tech company to support the project, the UAE central bank said in a subsequent statement, without naming the firm.

“Once completed, the outcome of this PoC will determine whether a digital currency could be introduced in normal market operations between the two countries,” it said.

Meanwhile, the UAE central bank has issued regulations for stored value facilities (SVFs), setting out requirements for consumer-focused digital payment services, Mansouri said. SVFs are a form of prepaid electronic cash or card.

Mansouri added that the central bank was finalising its crowdfunding rules, which would protect consumers when crowdfunding platforms began to play a bigger role in the UAE.

Reporting by Stanley Carvalho in Abu Dhabi; Editing by Andrew Torchia