Saudi Arabia, UAE Nov. 29, 2020 /AlexaBlockchain/ – Saudi Central Bank and Central Bank of the U.A.E. released a report today on a “joint Digital Currency and Distributed Ledger Project”.
Project Aber was an initiative launched by the central banks of Saudi Arabia and United
Arab Emirates to explore the viability of a single dual-issued digital currency as an
instrument of domestic and cross-border settlement between the two countries.
The high-level objectives of the initiative were:
• To explore, experiment, and gain a deeper understanding of distributed ledger
technology (DLT) and analyse its maturity;
• To explore an alternative DLT-based cross-border payment solution that can
overcome inefficiencies in existing cross-border interbank payment approaches;
• To understand and experiment with the dual issuance of a central-bank digital
currency;
• Benchmark findings against those of other central banks.
The project was structured into three distinct phases or use cases:
- Use case one to explore cross-border settlement between the two central banks;
- Use case two to explore domestic settlement between three commercial banks in
each country - Use case three to explore cross-border transactions between the commercial banks
using the digital currency.
The report concludes that a dual-issued CBDC was “not only technically viable” for cross border payments, but that CBDCs present “significant improvement over centralized payment systems in terms of architectural resilience.”
Ultimately, the Project Aber cleared all hurdles: “The key requirements […] were all met, including complex requirements around privacy and decentralization, as well as requirements related to mitigating economics risks, such as central bank visibility of money supply and traceability of issued currency.”
The report recommends a number of next steps for research and policy, including adopting DLT to improve the security of existing systems, “offering a DLT-based payments rails,” and expanding the scope of future Project Aber trials to include more geographically dispersed partners as well as the settlement of other assets, such as bonds.
While none have made as much headwind as Project Aber, other central banks have also moved to study the viability of CBDCs in recent months. Most recently, China recently released regulatory guidance legitimizing a digital yuan, The United Kingdom has similarly begun drafting regulation and proposing research into a possible CBDC, and Brazil’s economy minister has definitively declared that the South American superpower will have a CBDC.