DUBAI – “ASWAQ”
Blockchain, a digital technology that is bringing about efficiency in data and financial transactions through the use of cryptography – a technique for secure communication – has been best associated with bitcoin, the cryptocurrency whose meteoric rise in value last year caught the world by surprise beyond imagination.
Blockchain, despite being very much heard of in recent years, is still not widely understood by many. It is in fact the underlying ledger system that enables the trading of cryptocurrencies including bitcoin, ethereum, litecoin and others.
The technology, which can operate independently from cryptocurrencies, is increasingly being used by banks and other institutions as a secure and cost-effective ledger for many types of traditional and non-traditional transactions.
Now the technology behind bitcoin is being used in many areas of life, including finance, to deliver money and information safely and quickly.
Governments in the Arabian Gulf are increasingly investing in blockchain technology as a means of cutting costs and streamlining the delivery of key government services.
Abu Dhabi Securities Exchange (ADX) has signed an agreement with financial messaging services firm Swift and seven central securities depository (CSD) companies to use blockchain technology in post-trade operations and capital market transactions to cut costs and risks, it said in January this year.
The nine entities signed a memorandum of understanding, under which they will collaborate on distributed ledger technology (DLT) in areas that include research and development, identifying, defining and developing additional use cases for DLT in a CSD environment, and the post-trade landscape, such as services for different kinds of DLT-based digital assets. ADX said it was the first in the region to enter such an agreement.
“This partnership is a great step forward and another example of how Swift and the industry can work together to solve concrete business challenges with an innovative and collaborative mindset,” said Onur Ozan, head of Middle East, North Africa and Turkey at Swift.
“Blockchain technology is playing a transformative role in the financial services industry worldwide and we are excited to collaborate with different community players to reach significant milestones.”
ADX’s chief executive, Rashed Al Blooshi, said that DLT would bring “more efficient clearing and settlement operations through the reduced requirement for human input, increased system flexibility and data integration, and reduced costs and time.
Recently, the Australian Securities Exchange said it would implement a blockchain-based distributed ledger system to replace its existing settlement and clearing system in March this year.
US-based exchange Nasdaq said in September last year it was teaming up with Swedish bank SEB for a trial of a blockchain-based trading platform for mutual funds.
In the UAE, Dubai is leading efforts to adopt blockchain across government entities, aiming to be blockchain capital of the world, says director general of Smart Dubai, Aisha Bint Buti bin Bisher.
Smart City, the Dubai government agency entrusted with making Dubai the world’s smartest city, said recently it was close to implementing 20 blockchain applications in a number of civic agencies, including the Roads and Transport Authority, to introduce greater efficiency. Blockchain is already being used in land registry transactions.
Smart Dubai revealed in March last year that the move to blockchain, involving the use of highly secure distributed electronic ledgers, is expected to improve the delivery of basic government services, saving over 25 million productivity hours per year. The government agency collaborated with IBM and Consensys who are acting as strategic consultants and advisers, Ms Bisher said.
The Dubai Land Department announced plans in October last year for a secure database based on blockchain, to record all real estate contracts and lease registrations, which in turn will be linked to the Dubai Electricity and Water Authority and telecoms providers, enabling a more efficient billing system for residents and utilities.
The Dubai Land Department, Dubai Municipality, Dewa and the Department of Naturalisation and Residency Dubai are among those running blockchain pilot projects since last year. Meanwhile, Dubai Customs, Dubai Trade and government-owned ICT firm Dutech are working with IBM on blockchain ledger projects.
“Investment in blockchain across the GCC and beyond is ramping up at an impressive rate as organisations recognise it for the disruptive technology that it is,” said Ramez Dandan, the national technology officer at Microsoft Gulf, during the recent blockchain conference in Dubai.
Dandan added: “We strongly believe in the technology’s immense potential for enterprises of all scales and industries. It allows them to share business processes with suppliers, customers and partners, leading to new opportunities for multi-party collaboration and eventually exciting new business models.”
“While others were still debating the prospects of this new technology, Dubai broke ground when the world reluctantly approached this technology. Already blockchain is rewriting how we deal with city services. In just a handful of years, blockchain has transformed key aspects of our city,” said Ms Bisher.