In 2019, the Saudi Central Bank (SAMA) and the Central Bank of the United Arab Emirates (CBUAE) collaborated on a joint endeavor known as Project Aber. This project aimed to assess the capabilities of Digital Currency and Distributed Ledger technology, with a specific focus on transforming cross-border payments between the two countries. As part of this initiative, a unique digital currency was introduced by both nations, designed for settlement purposes among commercial banks within their respective jurisdictions as well as across borders.
The outcome of the project indicated that Distributed Ledger Technology (DLT) offers central banks the potential to reimagine both domestic and cross-border payment systems in innovative ways. All the essential requirements were successfully met, including intricate aspects related to privacy, decentralization, and addressing economic risks. Notably, this encompassed ensuring central bank oversight of money supply and traceability of issued currency to mitigate economic concerns. The project surpassed its initial performance objectives, demonstrating that DLT technologies can deliver high performance without compromising safety or privacy. Consequently, the project not only validated the feasibility of DLT as a mechanism for domestic and cross-border settlement but also affirmed the technical viability of a unified digital currency jointly issued by both central banks.
Moving into January 2023, SAMA revealed its ongoing commitment to exploring Central Bank Digital Currency (CBDC). It is currently engaged in a project phase that focuses on implementing CBDC for domestic wholesale use cases, working collaboratively with local banks and fintech companies. SAMA’s objective is to assess the economic impact, market readiness, and potential swift and robust applications of a CBDC-based payment solution. Furthermore, SAMA aims to thoroughly review policy, legal, and regulatory considerations before progressing to subsequent phases of the CBDC journey, aligning with the goals of Saudi Vision 2030.
SAMA emphasized that while no definitive decision has been reached regarding the introduction of CBDC in Saudi Arabia, the institution remains dedicated to exploring the benefits and potential risks associated with CBDC implementation. This comprehensive exploration will enable informed decision-making within SAMA and contribute to broader CBDC investigations within the central banking community.
Use-Cases:
The three use cases investigated were as follows:
Use Case 1: Payment between central banks
This involved creating a shared ledger between the two central banks on which various digital currency transactions could take place.
Use Case 2: Domestic Payments between Commercial banks
This focused on domestic payments between commercial banks in each of the countries.
Use Case 3: Cross-border Payments between Commercial banks
This addressed cross-border transactions between commercial banks of the 2 countries.
Sources:
https://www.sama.gov.sa/en-US/News/Documents/Project_Aber_report-EN.pdf