Doha: Blockchain could potentially revolutionize the financial sector of the GCC region. The region needs to take the necessary steps to transform the blockchain from a disruptor into a vital activator of the FinTech space in the region.
Marmore Mena Intelligence noted in its latest report that financial companies across the GCC region are evaluating the use of blockchain for cross-border payments, trade agreements and data and identity management. Central banks have allocated more resources for blockchain technology, exploring the potential of digital technology and currencies through experimental learning.
Data from Citing International Data Corporation (IDC), Marmore analysts have noted that Mena's total spending on blockchain or distributed ledger technology (DLT) will reach $ 370 million in 2021, with a CAGR of 77.4% between 2016 and 2021, with financial services sector accounting for 35.5 percent of total spending.
DLT offers numerous advantages over legacy systems, in particular reducing transactions, settlement and reconciliation costs. Various factors such as interest in technological innovations, the emergence of new entrants in payment services and intermediation, the decline in the consumption of cash in some countries and the emergence of digital tokens individuals have induced central banks to consider the option of introducing fiat digital currencies.
The interest on the digital currencies of the Central Bank (CBDC) has been increasing over the years, as a series of experiments involving CBDC has been conducted. The Bank of International Settlements (CBI) report on the CBDC concludes that wholesale digital currencies combined with wholesale digital currencies combined with the use of DLT increase the efficiency of regulations for transactions on securities and derivatives, even if the proposals so far seem very similar and not clearly superior to the existing infrastructure.
Marmore analysts said that one of the central banks in the GCC region is currently working with a regional monetary authority on a digital currency to accelerate financial transactions between the two countries. These countries have launched a distributed Proof-of-Concept (PoC) system to facilitate cross-border agreements.
The PoC, which is at an early stage of development, should be completed in the last quarter of 2019. A technology company is tasked with conducting a PoC implementation. The Proof of Concept simulation supported by the fiat currencies of the two countries will demonstrate the feasibility and practical potential of the implementation of the project.
According to Marmore, central banks around the world are testing the CBDC for several use cases. India is studying the feasibility of introducing the CBDC due to the increased cost of managing fiat / metallic currency. For Sweden, CBDC benefits from the absolute decline of the cash amount. Many central banks believe that the CBDC could be one of the solutions for solving cross-border payment challenges and settlement spaces.