CBDC Report From UAE and Saudi Arabia Central Banks
A report by the central banks of Saudi Arabia (Saudi Monetary Authority) and the United Arab Emirates (CBUAE) under the Aber Project found that distributed ledger technology (DLT) can improve remittance systems and meet privacy demands.
Objectives Of The Aber Project
The Aber project (HyperLedger Fabric-built Project Aber) is a central bank-backed digital currency (CBDC) experiment launched in January 2019.
The project was built on previous trials in Japan, Singapore (Ubin project) and Canada (Jasper project). Unlike previous attempts with single currency support through the payment network, two currencies were targeted through this project.
With Aber, a Proof-of-Concept project, the two central banks had the opportunity to explore the DLT mechanism and how it could be implemented in CBDCs.
The project will also showcase the viability of a shared digital currency. The two central banks are considering the possibility of using the system as an additional reserve system for domestic payment systems when there are any cuts.
Over the course of the year-long project, six local commercial banks operated nodes and provided money from reserves invested in their own central banks. The digital currencies used during this experiment were supported by the respective central banks. The entire project was divided into three phases.
If successful, the Aber project will reorganize financial transactions between the two countries.
Can Meet Privacy Requirements
The result of the project now reveals the enormous benefits of DLT and CBDCs. Although more research is needed, blockchain-based remittance systems have obvious differences and advantages compared to traditional methods.
First, the technology behind digital currency can meet users ‘ privacy requirements. Secondly, DLT-connected payment systems provided better advantages in both local and International Bank agreements compared to centralized systems.
However, further research could lead to the expansion of the project, the addition of more fiat currencies and the launch of more financial instruments in the system. As we recently reported, the German Federal Finance Minister called for acceleration in the Digital Euro.