ABU DHABI, Ahmed Ali Al Sayegh, Minister of State, said that the UAE and China have nourished a deep respect, political confidence and support of each other for decades, with their governments working even more closely on joint activities and projects, not only to boost the Belt and Road initiative, but also the well-being of our economies and societies.

The minister's remarks came while addressing the "Bo-ao Forum for Asia", held in celebration of Bo’ao’s 20th Anniversary this year.

"Chinese President Xi Jinping's 2018 state visit to the UAE and the visit of His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, to China in 2019, had forged a stronger partnership and ushered in new and exciting areas of cooperation between the two countries. These include innovation and technology, financial services, education, food security, energy security, healthcare to climate change," he added.

He congratulated Ban Ki Moon, Chairman of the "Bo-ao Forum for Asia" on the celebration of Bo’ao’s 20th Anniversary this year. "This is a landmark achievement and a testament to the undeniable importance of BFA in supporting the Asian growth and fostering globalisation over the years. There is no doubt that this is Asia’s century."

Al Sayegh added that Asia and the Middle East region have maintained long and mutually respectful, strong trade and cultural ties. Likewise, China and the UAE have nourished a deep respect, political confidence and support of each other for decades. Both governments and UAE entities are working even more closely on joint activities and projects, not only to boost the Belt and Road initiative, but also the well-being of our economies and societies.

"As such, I am honoured to be part of the Bo’ao conversation to discuss and share how dynamic consumer needs, digital technology and increasing cross-border interactions are changing the economic and financial sectors across the globe.

"In fact, there has been an accelerated adoption in digital innovation. More countries, governments and sectors are embracing technology advancements and integrating digitalisation in every key aspects of their economies and lives."

Al Sayegh noted that policy-makers, central banks and regulators are also using their roles as catalysts and facilitators to further digital innovation, increase interoperability or integration in cross-border activities. Of which, the focus on digital currencies and digital payments has taken centre-stage.

"Digital currencies are a promising new innovation that could address varying needs such as broadening financial inclusion, better serving the unbanked and smoothening cross-border trade flows, The digital currencies that could become more widely adopted are: "First –Retail central bank digital currencies ("CBDCs").Second – Wholesale CBDCs, which financial institutions can use for large value payments; and Third – Stablecoins, which are issued by private sector players adopted by the client network of such issuers."

Fundamentally, the minister continued, "The retail central bank digital currencies (CBDCs) can strengthen interconnections within and between sovereign economies, benefitting both the private and public sector. Domestically, it can help drive a cashless economy and make monetary policy transmission more efficient.

"One of the key advantages of CBDCs is to support faster and safer cross-border payments. In turn, this may facilitate cheaper and more efficient cross-border trade.

"When we look at digital evolution and financial innovation, Asia, particularly so in China, has been at the forefront, from the development to the implementation stages.

"In the retail space, for instance, the People’s Bank of China’s e-CNY (digital reminbi) initiative holds great promise. The scale of the pilot experimentations should yield good data and insights into how retail CBDCs might affect the economy in practice."

In the wholesale CBDC space, the Central Bank of the UAE has joined the People’s Bank of China, the Hong Kong Monetary Authority and the Bank of Thailand in a project, known as the Multiple CBDC ("m-CBDC") Bridge project, to explore the use of blockchain technology to support real-time cross-border multi-currency payments, the minister added.

He noted that he is looking forward to the outcome of this initiative and its impact on cross-border fund transfers, international trade settlement and capital market transactions in the near future.

"Stablecoins as another digital currency can also play a part in bringing the unbanked into the financial system and widen financial inclusion. Though Facebook’s Diem project is still in its early stages, once ready, it could offer a bridge for jurisdictions where central banks are still exploring CBDCs.

"However, regulators would likely ask for greater transparency and more robust governance arrangements from stablecoin issuers before such digital currency can be used in their jurisdictions. The possible risks posed by stablecoins must not be allowed to compromise the integrity of their financial systems nor pose potential risks to the ecosystem.

"We expect that digital currencies will increasingly be regulated so that they can continue to integrate into the global financial system. In the medium term, we anticipate that further safeguards, going beyond the current emphasis on tighter AML/CFT supervision, will be applied to digital currencies."

In general, the minister said, the offering of digital securities bears the same investor protection risks as any other type of security issuance.

"For the Middle East region, financial innovation has become one of the key enablers for economic diversification and solution for growth. This is particularly relevant in view of the Middle East and North Africa (MENA) region’s demographics.

"The MENA region is home to 450 million people. Of that total, about half of the population is younger than 25 years old. A youthful population of such size presents an attractive and fast-growing market of early technology adopters. At the same time, almost half of this population have limited or no access to financial services.

"This creates a huge opportunity to provide the MENA markets with more financial and banking options including digital banking and FinTech. It is also a big opportunity to offer digital banking solutions to markets where physical bank branches are scarce or hard to reach."

Strategically placed in the capital of the UAE and heart of the MENA region, Al Sayegh continued, "Abu Dhabi Global Market (ADGM) was set up in 2015 to provide a progressive International Financial Centre ecosystem that supports financial institutions in Abu Dhabi and champions the development of innovative financial solutions to address the evolving financial needs in the region.

"We continue to engage with key Chinese authorities, China state-owned enterprises and financial institutions to facilitate cross-border activities, investment and regulatory collaborations between Abu Dhabi and China to support the Belt-and-Road initiative.

''In recent years, we have been steadily enhancing our regulatory collaboration and exploring FinTech initiatives in each’s respective market. We hope to strengthen our cooperation and look at common areas of interest including digital payments, asset management, A.I, sustainable financing, digital assets and digital currencies, venture capital and more.

"At ADGM, we are exploring initiatives that enable firms to issue digital securities in multiple jurisdictions simultaneously, while in compliance with the local laws and requirements. With this, firms can more efficiently tap on pools of capital across the world. We have also invested in RegTech proofs-of-concept to help the virtual asset industry in our jurisdiction to achieve regulatory compliance and maintain the highest level of trust and safety for their customers."

The minister concluded with a positive note over the benefits that digital currencies will bring to the financial sector and economy, broadening access to financial services and making cross-border trade more efficient. "These benefits can only fully be obtained once digital currencies have come under regulatory safeguards that are appropriate to their increasingly important role in the global financial system."

Source: Emirates News Agency