The Qatar Central Bank (QCB) has successfully completed the necessary groundwork for a central bank digital currency (CBDC) initiative and has commenced the initial phase of an experimental project. The QCB aims to focus on facilitating large payments settlements among major local and international banks.
While limited information about the project has been disclosed, the state news agency has stated that the project will center around distributed ledger technology, artificial intelligence, and the improvement of liquidity and transactions involving securities. The project is scheduled to run until October.
The QCB initiated its exploration of CBDC technology in March 2022 and officially announced the launch of the project in June of the same year. During the Qatar Economic Forum in May, QCB governor Sheikh Bandar bin Mohamed bin Saoud al-Thani mentioned that they are currently in the early stages of assessment, carefully considering the advantages and disadvantages of issuing a CBDC.
Keeping pace with its neighboring countries, the United Arab Emirates (UAE) became a founding member of the mBridge project, alongside China, Hong Kong, and Thailand. The UAE has already utilized mBridge to facilitate remittance payments to India and for wholesale transfers among the project members. Additionally, the UAE participated in a CBDC proof-of-concept called Project Aber, in collaboration with Saudi Arabia, which concluded in 2020.
In anticipation of the CBDC project announcement, the QCB recently introduced a new fintech sandbox called the Express Sandbox. This sandbox offers eligible participants a shortened testing period, accelerated testing cycles, and a more streamlined evaluation process. Similar to the new sandbox, the CBDC project aligns with official national development strategies, although these strategies do not explicitly mention CBDC.
It is worth noting that the Qatar Financial Centre Regulatory Authority, a jurisdiction for business development in Qatar, banned virtual asset services from operating within the country in 2020. However, the Financial Action Task Force criticized Qatar in 2023 for its failure to enforce this ban and for its limited understanding of more sophisticated forms of money laundering and terrorist financing.
In March, there were rumors within the crypto community suggesting that the Qatar Investment Authority would make significant investments in Bitcoin (BTC). However, the likelihood of this remains uncertain.
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