Qatar Central Bank Launches Central Bank Digital Currency Project

The Qatar Central Bank (QCB) has finalized the groundwork for a central bank digital currency (CBDC) initiative and initiated the first phase of an experimental scheme. The focus of this project lies in examining settlements of significant transactions between major local and international banks.

Limited information has been disclosed regarding the specifics of the project. According to reports from the state news agency, the project will prioritize aspects such as distributed ledger technology, artificial intelligence, enhancing liquidity, and transactions involving securities. The project is scheduled to continue through October.

The QCB embarked on exploring CBDC technology in March 2022 and officially commenced a project in June of the same year. During the Qatar Economic Forum in May, QCB governor Sheikh Bandar bin Mohamed bin Saoud al-Thani stated that they are in the preliminary stages of evaluating the advantages and disadvantages of issuing the CBDC.

Regional Developments

In a bid to keep pace with neighboring countries, the United Arab Emirates (UAE) was among the founding members of the mBridge project, collaborating with China, Hong Kong, and Thailand. The UAE has already utilized mBridge for facilitating remittance payments to India and for wholesale transfers among project members. Additionally, the UAE engaged in a CBDC proof-of-concept named Project Aber, partnering with Saudi Arabia, which concluded in 2020.

Amidst these advancements, on the eve of announcing the CBDC project, the QCB introduced a new fintech sandbox referred to as the Express Sandbox. This platform offers expedited testing periods, swift testing cycles, and an overall streamlined evaluation process for qualified participants. While the new sandbox and the CBDC project are aligned with official national development strategies, CBDC is not explicitly mentioned in any of these strategies.

Regulatory Landscape

The Qatar Financial Centre Regulatory Authority, a business development jurisdiction within the country, imposed a ban on virtual asset services in 2020. Criticism from the Financial Action Task Force in 2023 highlighted Qatar's failure to enforce this ban and its lack of comprehension of more sophisticated forms of money laundering and terrorist financing.

Rumors surfaced in March within the crypto community suggesting that the Qatar Investment Authority was contemplating a substantial investment in Bitcoin (BTC). However, skepticism surrounds the feasibility of such an investment.

Source: Hataf News