In a joint statement, the central banks of UAE and Saudi Arabia have announced the agreement to launch a dual-issued CBDC for Cross-Border Payments.
November 30, 2020 | AtoZ Markets – Central banks of Saudi Arabia (SAMA) and the United Arab Emirates (CBUAE) released a report on a year-long joint central bank digital currency (CBDC) project dubbed “Project Aber”.
The results from the project show that distributed ledger technology (DLT) can improve cross-border payments and meet the demands of financial privacy in a purely digital context.
Saudi Arabia, UAE assess CBDC’s cross-border payments opportunities
Project Aber, which was launched in January of 2019, was a joint effort between Saudi Arabia and the UAE to establish a proof of concept (PoC) designed to “contribute in the body of knowledge in CBDC and DLT technologies.”
The collaboration of the two central banks in such a study is among the first of its kind. To this end, the report notes that the choice of name in “Aber” spoke to the core mission of the project:
“The name Aber was selected because, as the Arabic word, for “crossing boundaries”, it both captures the cross-border nature of the project as well as our hope that it would also cross boundaries in terms of the use of the technology.”
Broken into three distinct phases that progressively expanded the scope of the trial to six different commercial banks, the report notes that the project used a digital currency backed with real money in order to force “greater consideration” of issues surrounding security and existing payment systems.
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.”
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Furthermore, 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.
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