Will the first Arab digital currency launched by Saudi Arabia and the UAE succeed?

Saudi Arabia and the UAE announced the launch of the first Arab digital currency, "Aber", to take advantage of the advantages of low-cost electronic financial transactions.

However, despite the advantages that this common digital currency is expected to provide, there are concerns and challenges that the two countries may face before achieving the desired benefit from entering the digital currency market.

Muhammad Hassan, director of the Caveo Academy of Financial Brokerage, believes that "Saudi Arabia and the UAE have the ability to launch a common digital currency, but this currency will have a special character that distinguishes it from other digital currencies, given its issuance and support by the government authorities in the two countries."

He added: "The goal of digital currencies since their appearance is to save the time it takes to transfer money from one country to another, in addition to removing the third party, i.e. banks, from the money transfer equation, which leads to the disappearance of the cost of financial transactions charged by banks and banking and financial institutions."

Hassan explained that the expected Saudi-Emirati digital currency will initially be a “service” currency, that is, it will be used primarily “in transactions between banks, and between local institutions, and therefore, it will not be tradable between people such as Bitcoin, which ensures the stability of its value.” ".

Hassan predicted that the world will completely convert to currencies and digital assets within fifty years.

He pointed out that there is a great benefit that the economies of the two countries may reap, which is the elimination of the parallel economy, "as the shift to the use of digital currencies in the two countries requires reducing the liquidity circulating directly in the markets outside the banking sector."

"There is a plan announced by the governor of the Central Bank of the UAE that includes a strategic study to provide the technological, legislative and regulatory needs necessary to launch the new digital currency," Mohamed Zeidan, chief financial market strategist at ThinkMarkets, told the BBC. successfully this coin.

He added, "The adoption of the new currency by the two governments will remove any obstacles they may face in the future."

Risks and Challenges

Regarding the risks related to dealing with digital currencies, Hassan warned that the shift to the use of digital currencies may put pressure on the financial and monetary authorities in the two countries. Hassan adds: "Transitioning to a traded currency that is subject to the market price is a great challenge and is related to the level of ability to put in place legislation that immunizes the economy against any potential risks of the new digital currency."

Zeidan said: "Like other digital currencies, the digital currency will be 'transient' exposed to risks, especially with regard to its legal status. But this obstacle can be overcome by issuing clear legislation regulating all aspects related to dealing with this currency."

Zaidan warned of another challenge, which is the ability to electronic protection. "We have all heard about the electronic hacking operations that the largest cryptocurrency exchanges have been exposed to," Zeidan said.

He added: "The fluctuations in the money and digital currency markets are one of the most important risks facing this project as well, as it is not yet known whether the monetary authorities in Saudi Arabia and the UAE will link the currency exchange rate to the local currency or to the US dollar, and both options make the currency Digital is subject to extreme market volatility.

Crypto or digital currencies have many advantages that contribute to developing financial transactions and improving the quality of financial services, because electronically traded assets depend on the decentralized system in transactions.