The inclusion of the digitization of payments is one of the most important fundamental amendments approved by the new monetary and banking law in Algeria.
The law recently ratified by the Council of Ministers headed by President Abdelmadjid Tebboune stipulated the introduction of a digital form of monetary currency, called the “Algerian Digital Dinar”, which the Bank of Algeria would develop, operate and monitor.
The amended law, of which "Al Jazeera Net" obtained a full copy, referred to "the openness of the banking ecosystem to digital banks and payment service providers, as well as the expansion of payment methods to include electronic currency."
On December 25, the Council of Ministers approved the draft law on loan and bank money, where President Tebboune confirmed that its legal value "comes as an extension of the reforms that the financial and economic systems have known in general over the past three years."
For the first time since its promulgation on April 14, 1990, the Monetary and Loan Law is subject to a comprehensive amendment, while several limited technical amendments were known by presidential orders, in the years 2001, 2003, 2010, and the last in 2017, to approve non-traditional financing, in order to cover the budget deficit and revive the economy. Affected at the time by the decline in fuel revenues.
Prime Minister Ayman Ben Abdel Rahman told the official news agency, "The new revision aims to strengthen the governance of the banking system, led by the Bank of Algeria, and improve its transparency, while granting the Monetary and Loan Council powers that enable it to accompany the transformations taking place in the banking environment, in addition to expanding its powers in The field of accreditation of investment banks, digital banks and payment service providers.
Regarding the content of the digital dinar and the background to its adoption by the Algerian monetary authorities, financial expert Abdelkader Breish explained that it has absolutely no connection with the currently known digital money, or the so-called encrypted or electronic currency, such as bitcoin, ethereum, and others.
Algeria adopts the digital dinar, in a move to reform its monetary and financial system (Al-Jazeera)
Liquidity management
On the other hand, Expert Breish - a member of the Parliament's Finance Committee - considered the adoption of the digital dinar in Algeria, within the context of financial reforms and the modernization of the banking system, in order to enable the Bank of Algeria to better control the volume of liquidity circulating between banks.
He added to Al-Jazeera Net that the decision aims, during the first stage, to control and manage liquidity between banks, and in its relationship with the Central Bank at the level of the money market, under the supervision of the Bank of Algeria, in order to control a banking block of 1,500 billion Algerian dinars ($11.1 billion), according to March statistics. March 2022.
While the measure aims, in a second stage, to generalize payment methods and prepare the supportive environment for the expansion of financial technology, according to the spokesman.
Accordingly, financial transfers and liquidity settlement between banks will take place using financial protocols, instead of transfers by traditional methods and reduce the movement of money in its liquid legal form, and this would reduce the cost of printing, transferring and guarding legal money, according to expert Breish.
From a technical point of view, the launch of the Algerian digital dinar will also contribute to the central bank’s ability to track the movement of liquidity and more accurately know the areas that account for a greater share of liquid transactions, and thus the ability to contain them and impose dealings by various means of payment, such as checks, money transfers and various means of payment including electronic ones, and the words of the parliamentarian himself.
Parliamentarian Abdul Qadir Breish believes that the interim goal is to control the management of financial liquidity between banks (Al-Jazeera)
Containing inflation and the parallel market
For his part, Abd al-Rahman Aya, director of the laboratory for the development of the Algerian Economic Corporation at Ibn Khaldun University, confirmed that his country's experience with the digital dinar is not the first, but rather it exists, and it emerges when the customer uses money alternatives, similar to electronic cards in payments, where the value is transferred. Account to account without physical trading of liquidity.
He explained to Al-Jazeera Net that the balances that contain money and are moved with alternatives generally consist of physical deposits, meaning that the customer or the bank's customer provides his account with paper or metal money, before he has the option to use it, whether in its physical form (withdrawing money to pay) or moving it with alternatives. It is called digital payment.
From this standpoint, what is new in the Algerian government’s step from a technical point of view is the direct provision of bank accounts for institutions (and then individuals in the future), without the physical presence of money in its paper or metallic form, according to expert Aya.
The step also allows for an increase in the monetary mass without the physical printing of money, and it also enables controlling inflation levels, because this money is moved by electronic payment methods (payment cards, the Internet, mobile), as it cannot be managed outside the banking frameworks, and it also allows with the passage of time to absorb Parallel market money.
Expert Abd al-Rahman Aya is waiting for the new monetary and loan law to set the limits for dealing in the digital dinar, and for those involved in banks, government and private institutions, and the public, while setting frameworks to monitor the movements of the digital dinar, through banking supervision committees or by means of bank audit work.
Expert Abd al-Rahman Aaya believes that the adoption of the digital dinar will lead to controlling inflation and containing the parallel market (Al-Jazeera)
The openness of the Algerian economy
On the other hand, expert Breiche considered that the launch of the digital dinar through the introduction of financial technology is an important factor in preparing the environment for engagement in the global banking system, as it will increase the openness of the Algerian economy to the outside world.
He stressed that giving more flexibility in the movement of remittances to and from abroad enhances confidence in the Algerian financial and banking system and contributes to attracting foreign direct investments in the banking sector and financial institutions to invest in Algeria.
Banking information security
On the other hand, analyst Aya stressed the need to give utmost importance to banking information security to protect the values and data stored in devices or in the clouds, while seriously considering the establishment of a huge data center for the Algerian banking system, to manage transactions in the digital dinar.
In his turn, Expert Breish, who is an advisor to the International Institute of Governance and Sustainable Development, stressed a number of caveats to secure the process, which requires preparing the organizational and technical aspects based on a legal basis, which "will be included in the monetary and banking law that is expected to be discussed and approved by Parliament in the coming days."
The digital transition also requires preparing the logistical aspects of appropriate means of information and communication technology, the speed of Internet flow, networking between banks and the central bank, and huge centers for storing and managing data, as he put it.
The most important thing in all of this is the ability to protect systems and information security, and the need to control cyber security, from the point of view of expert Breish.