The Qatar Central Bank (QCB) is planning to launch its new digital currency project by the end of 2024.
This initiative will be a wholesale Central Bank Digital Currency (CBDC) project, focusing on testing and simulations rather than real Qatari Riyals.
It will be to enhance financial infrastructure and introduce new technologies in payment systems.
Key Details of the Wholesale CBDC Project
The QCB has detailed its Qatar Central Bank CBDC project, which will initially center around wholesale transactions.
One significant aspect of this project is its potential use in the efficient settlement of financial digital securities.
However, the central bank is not ruling out the possibility of extending this project to retail transactions in the future.
According to the QCB’s website, “Their implementation provides for a new form of financial market infrastructure (FMI) to be deployed which may improve efficiency and reduce intermediation of financial markets.”
The wCBDC program will first explore the issuance of digital government bonds.
These bonds will be digital versions of existing bonds, which will provide fungibility between the traditional financial securities infrastructure (FSD) and the new digital form.
How the Project Will Operate
In the first phase of the Qatar Central Bank CBDC project, selected banks will take part in testing the system.
These banks will acquire the CBDC by converting traditional Qatari Riyals into digital currency on a 1:1 basis.
According to the QCB, “participant banks can acquire CBDC by converting traditional QAR in an RTGS settlement account to wCBDC.”
There will be no impact on either the banks' or the QCB’s balance sheets. The initial phase will involve simulations and will not use real money.
Qatar launches CBDC testing for wholesale payments https://t.co/DFZODdjJpR
— CoinGeek (@RealCoinGeek) June 6, 2024
The QCB’s will use Distributed Ledger Technology (DLT) to govern the system and ensure it aligns with Qatar laws and regulations.
This phase is also designed to be neutral to Qatar's monetary policy should real funds be involved in the future.
As stated by the QCB, “The program is also designed to be neutral to monetary policy should it be deployed using real money.”
Benefits for Commercial Banks
Commercial banks are to benefit from the new CBDC. They will be able to conduct interbank payments and Delivery versus Payment (DvP) transactions instantly and around the clock.
Banks can also distribute minted CBDCs, creating new services based on this digital currency’s programmability.
Additionally, commercial banks could issue tokenized deposits backed by fiat money. These tokenized deposits could be used in payment and treasury operations for the banks and their clients.
During the first phase, banks can explore two primary use cases: payments and transfers in CBDC, and the settlement of digital securities with CBDC.
The CBDC will provide immediate, 24/7 settlement of financial market securities, improving transaction speed and efficiency.
Role of Artificial Intelligence
The Qatar Central Bank CBDC project will also use Artificial Intelligence (AI) to develop a foundational liquidity forecasting model to assist in managing banks' liquidity positions.
As Cointelegraph reported, the QCB began studying CBDC technology in March 2022.