Central banks from two of the Middle East’s most powerful economies today released a report on a year-long collaborative project by the Central Bank for Digital Currency (CBDC) – and the results speak in favor of blockchain technology.
The Aber project, announced for the first time in January 2019, was a joint effort by the United Arab Emirates and Saudi Arabia to establish a “proof of concept” that “should contribute to the wealth of knowledge in CBDC and DLT technologies”.
The joint efforts of two central banks in such a study are among the first of their kind. To this end, the report notes that the choice of the name in “but” spoke for the core task of the project:
“The name Aber was chosen because, as the Arabic word for“ crossing borders ”, it captures both the cross-border character of the project and our hope that it would also cross borders with regard to the use of the technology. ”
The report is divided into three phases in which the scope of the experiment was gradually expanded to six different commercial banks. The project uses a digital currency backed by real money to force a “greater consideration” of security issues and existing payment systems.
The report concludes that a double-issued CBDC was “not only technically viable for cross-border payments”, but that CBDCs show “a significant improvement over centralized payment systems in terms of architectural resilience”.
Ultimately, the project Aber cleared all the hurdles: “The most important requirements […] have all been met, including complex requirements related to data protection and decentralization, and requirements related to mitigation of economic risks such as the visibility of the money supply by the central bank and the traceability of the currency issued. ”
The report recommends a number of next steps for research and policy, including the introduction of DLT to improve the security of existing systems, “offering DLT-based payment channels” and expanding the scope of future Project Aber attempts to include geographically dispersed partners as well the settlement of other assets such as bonds.
While none has faced as much headwinds as Project But, other central banks have also been trying to investigate the viability of CBDCs in recent months. Most recently, China recently published guidelines that legitimize a digital yuan. The UK has also begun drafting regulations and proposing research into a possible CBDC, and the Brazilian Minister of Commerce has definitely stated that the South American superpower will have a CBDC.