Saudi Arabia Inches Closer to Officially Launch Digital Currency with UAE

Saudi Central Bank (SAMA), in partnership with the Central Bank of the UAE, released a report mentioning the benefits of using a distributing payment system over a centralized payment structure. The central banks have concluded a joint 1-year central bank digital currency (CBDC) pilot.

Dubbed ‘Project Aber’, the new report showed promising results and marked significant improvement over centralized payment systems in terms of architectural resilience. The central banks are planning to mitigate economic risks associated with the CBDCs. The authorities aim to adopt distributed ledger technology (DLT) to explore the possibilities of settlement of assets like bonds.

The project was initially launched by the two central banks in early 2019 to launch the ‘Aber’ digital currency, a name that means ‘Crossing Boundaries’ in the Arabic language. The central banks initiated the project to check the possibilities of a single dual-issued digital currency as an instrument of domestic and cross-border settlement between the two countries.

“The project confirmed that a cross-border dual issued currency was technically viable and that it was possible to design a distributed payment system that offers the two countries significant improvement over centralized payment systems in terms of architectural resilience. The key requirements that were identified 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,” the official report cites.

The Future

The authorities termed the project as “successful” meeting all its objectives. For the future, the central banks are set to explore many options including a framework for real-time gross settlement (RTGS) and expansion of delivery versus payment (Dvp) structure. “There is the possibility of extending it geographically to include regional or other international central banks or linking heterogeneous networks together,” the report mentioned.

Central banks around the world are exploring options to launch CBDC’s amid growing demand from consumers.