Mohsen Al Zaharani is one of the most important financial officers in the Middle East. He’s the head of innovation at the Saudi Arabian Monetary Authority (SAMA). SAMA is the closest thing there is in Saudi Arabia to a central bank (more on that later), and he’s been working since at least last October in bringing Ripple’s technology to eliminate friction in international transfers in Saudi Arabia and also in the United Arb Emirates.
SAMA and Ripple
In a recent interview, he gave today, the SAMA Innovation Head explained what SAMA’s role in Ripple’s adoption is, and he announced that two of the county’s domestic banks would go live with Ripple before the current quarter finishes.
He explained that SAMA is not going to adopt Ripple but that it’s still working to encourage and educate the local commercial banks to adopt the technology.
In this article, we’ll explain to you why both are very good things for Ripple, even if they don’t seem so spectacular in the surface.
– We (central bank) don’t implement Ripple technology but we still work with Ripple to educate and encourage commercial banks to use their technology.
– 2 banks will go live with Ripple this quarter (Q1 2019) very soon
Mohsen Alzahrani – SAMA pic.twitter.com/FQtL8bzmJT
— Steven Diep (@DiepSanh) February 12, 2019
Banking in the Islamic world
First of all, let’s try and understand why SAMA doesn’t want or need Ripple as a commercial product. The key thing we need to understand here is that Islamic countries have a philosophy of their own when it comes to finances and banking.
It’s very different from Western ideas, and they’re often incompatible. That is why, while Islamic countries do have a central authority for monetary policy, it’s not a central bank in the same sense that it would be in the West.
But there’s something else. Even if SAMA was a Western-style central bank, it wouldn’t need Ripple anyway. Why? Because central banks do not have retail customers, they are the government’s bank or the bank of the domestic banks.
As such, you’ll never be able to order a money transfer at the Federal Reserve (in the US), or at the Banco de México (in Mexico) or at the Bundesbank in Germany and neither at SAMA. So the fact that SAMA won’t adopt Ripple doesn’t mean at all it doesn’t like the technology, it just means that it doesn’t offer that kind of service to the public (and it shouldn’t, anyway).
The second thing is even more important. SAMA is still working with Ripple so that domestic commercial banks adopt the technology. The ones that offer that kind of service to their clients. And this is where the beef is, but we have to see a little beyond the obvious.
As explained before, the Islamic banking philosophy has nothing to do with Western banks. Of course, they have fiat currencies, and banks, and all the usual trimmings, but the ideas about how banking should be are very hard to understand for westerners. And if this was an anthropology website, we’d explain that to you in detail, but let’s stick to the relevant parts.
Western financial technologies and products are often unavailable in the Islamic world because they don’t fit with Islamic banking practices. The fact that SAMA is helping promote Ripple in Saudi Arabia and other countries in the zone, means that they’ve found nothing objectable with Ripple according to Islam. That is where the huge deal is.
Why? Because that means that Ripple could be implemented in the future in almost any other Islamic country as well. And that’s a lot more than what you can say about many blockchain projects, but more importantly, about Stellar Lumens and Cardano, which are Ripple’s most direct competitors in this kind of market.
And last but not least, two Saudi banks are going live with Ripple this very quarter. This isn’t really news. Mr. Al Zahrani had already announced this last October 7th, but, as these things go, is always better to know that everything remains on track. And mind the “live” part, because most of Ripple’s current partners are using it in testing stages, and not at production.
Long story short: Ripple has managed to open doors for its technology and token in places in which many other digital assets will never enter. And that’s the real story here.
[Image courtesy of Pibabay]
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