The Middle East’s two most powerful economies, the United Arab Emirates (UAE) and Saudi Arabia, had its central banks release a report today. This report pertained to the joint central bank digital currency (CBDC) project that the two central banks have been doing for a year now. As it stands now, these reports have very good things to say about blockchain technology, which is always a plus.
Breaking Boundaries In More Ways than One
Project Aber stands as a joint effort between Saudi Arabia and the UAE to establish a “proof of concept.” This project was announced back in January of 2019, dedicated to contributing to the knowledge of both DLT technologies and CBDCs.
With two central banks combining their efforts to study this, Project Aber stands as the first of its kind. Even the name of the project, Aber, speaks to the project’s core mission, the report notes. Aber stands as the Arabic word for “crossing boundaries,” the report noted. As such, it captures the essence of crossing boundaries of technology use and the cross-border nature of the project itself.
Massive Success Reported
Project Aber is broken down into three phases, each distinct from the other and building on expanding the scope of the trial to six commercial banks. The report itself made it clear that the project was using digital currencies that had the backing of real money. This comes in order to force issues around existing payment systems and security to be considered in greater depth.
In the report, the overall conclusion is that a dual-issued CBDC is more than technically viable for cross-border payments. Indeed, the report highlighted that these CBDCs stand as a massive improvement when compared to centralized payment systems, particularly its architectural resilience.
Plans For The Future
Project Aber had ultimately cleared all the hurdles set out against it. The report detailed that it had met all the key requirements set out for it, including complex privacy and decentralization requirements. Other requirements were in regard to economic risks and mitigating them, such as issued currency traceability and money supply visibility.
An array of next steps were recommended by the report regarding policy and research. One of the primary suggestions is adopting DLT in order to improve existing systems, particularly their security. Further suggestions come regarding the expansion of Project Aber trials and their scope, bringing in more asset types, like bonds, and more geographically dispersed partners, as well. Another key suggestion is offering payment rails based on DLT, as well.
With Project Aber reaching its completion, the Middle East has officially entered the financial arms race of the world to put out their respective CBDC. China is still in the lead, having issued out a regulatory guidance recently that formally legitimizes the digital yuan. The UK isn’t far behind, and even Brazil is getting in on it.