Qatar Central Bank Begins CBDC Project

The Qatar Central Bank (QCB) has recently made significant strides towards launching a central bank digital currency (CBDC). Completed infrastructure now supports an ongoing experimental phase of the CBDC project. This first phase aims to facilitate large payment settlements between major local and international banks. Specifics about the project remain scarce. According to state media, the focus will be on employing distributed ledger technology and artificial intelligence, as well as improving liquidity and securities transactions. The experimental phase is set to continue until the end of October.

QCB’s journey into the realm of CBDCs began in March 2022, when they initiated studies on the technology. By June of the same year, the central bank announced that an official project was underway. At the Qatar Economic Forum this May, QCB governor Sheikh Bandar bin Mohamed bin Saoud al-Thani stated, “We are in the foundation stage and evaluating the pros and cons of issuing the CBDC.”

Looking at the regional context, the UAE has also been active in exploring digital currencies. It was one of the founding members of the mBridge project, along with China, Hong Kong, and Thailand. The mBridge initiative has already facilitated remittance transfers to India and inter-member wholesale transfers. The UAE collaborated with Saudi Arabia on a CBDC proof-of-concept called Project Aber, which concluded in 2020.

In a related development, a day prior to announcing the CBDC project, QCB launched a new fintech sandbox. This “Express Sandbox” aims to provide a reduced testing period, rapid testing cycles, and a streamlined overall evaluation process for eligible participants. Both the fintech sandbox and the CBDC project align with Qatar’s national development strategies, although these strategies do not explicitly mention CBDCs.

Cryptocurrencies have faced a rocky path in Qatar. In 2020, the Qatar Financial Centre Regulatory Authority prohibited virtual asset services from operating within the country. Earlier this year, the Financial Action Task Force criticized Qatar for not strictly enforcing this ban and for its limited grasp of complicated forms of money laundering and terrorist financing.

Despite the prohibition and official stance against cryptocurrencies, rumors abounded in March that the Qatar Investment Authority might make substantial investments in Bitcoin. These speculations, Remain doubtful and unconfirmed.

As Qatar ventures further into the digital currency space, its efforts highlight a commitment to harnessing modern technologies for financial innovation. The success or failure of these initiatives will likely influence how other nations strategize their own digital currency projects.

While the infrastructure and initial phases are in place, the long-term viability and impact of the QCB’s CBDC project remain to be seen. Much will depend on the outcomes of the technological implementations and the regulatory landscape as it evolves. The coming months will be critical in determining whether QCB’s efforts will set a benchmark for digital currency initiatives in the region.