FameEX Hot Topics | Qatar Central Bank Begins First Phase of Central Bank Digital Currency Project

The Qatar Central Bank (QCB) has initiated the first phase of its experimental central bank digital currency (CBDC) project, a significant move toward integrating CBDC into Qatar's financial framework. This initiative, which is integral to the nation's development strategy, is primarily focused on facilitating large payment settlements between major local and international banks using advanced technologies like distributed ledger and artificial intelligence to improve liquidity and securities transactions. This initial phase is slated to run until October.

QCB's involvement with CBDC technology began in March 2022, with the project formally announced by June of that year. During the Qatar Economic Forum in May, QCB Governor Sheikh Bandar bin Mohamed bin Saoud al-Thani discussed the project's foundational phase, emphasizing the ongoing assessment of the benefits and potential risks associated with deploying a CBDC.

In the broader regional context, the United Arab Emirates (UAE), Qatar’s neighboring country, has actively engaged in similar digital currency initiatives. The UAE was instrumental in the founding of the mBridge project, which has been used for remittance payments to India and for facilitating wholesale transactions among its member banks. The UAE also took part in Project Aber, a joint CBDC trial with Saudi Arabia that concluded in 2020.

Alongside the CBDC project, the QCB unveiled a new fintech sandbox called the Express Sandbox the day before. This platform is designed to streamline the testing process, featuring rapid cycles and a shortened evaluation period to boost fintech innovation within the nation. Both the CBDC project and the Express Sandbox are key components of Qatar’s extensive national development plans, though they do not explicitly reference CBDCs.

However, regulatory challenges persist. The Qatar Financial Centre Regulatory Authority, responsible for a major business development jurisdiction, imposed a ban on virtual asset services in 2020. In 2023, Qatar was criticized by the Financial Action Task Force for not effectively enforcing this ban and for a general lack of understanding of complex money laundering and terrorist financing schemes. These criticisms highlight the intricate balance Qatar must strike as it progresses its financial technology capabilities while navigating regulatory hurdles.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.