admin There seems to be a global rush to develop the first Central Bank Digital Currency (CBDC). Regions like the Middle-East are uniquely positioned to take advantage of CBDC as energy and global trade makes shift.
CBDC Details
Also known as a CBDC, Central Bank Digital Currency is a new type of digital currency that is operated and regulated by a monetary authority of a country. Biggest change to come out of CBDC is to cut out local banks. Like Bitcoin, CBDCs should function better on the internet compared to fiat currencies we use today. CBDC will be different from decentralized currencies like Bitcoin because it will be controlled centrally by a central bank blockchain, albeit that blockchain has potential to grow more decentralized as adoption increases and if made more public.
While several governments worldwide are already experimenting with their viability, none have officially launched their own CBDC as yet. And while it may seem that CBDCs are still in the exploratory stage there seems to be some panic around being the country to have a functioning CBDC. The Middle East is in a key position due to their role in powering the world through oil.
Middle East’s Position
While Kuwait, Oman, Saudi Arabia, UAE, Iran and other Middle Eastern countries have long relied on energy resources for economic growth, the global demand for oil should reduce over the long term as global mandates for greener energy kick in and the newfound interest in nuclear power. Not to mention new oil wells being discovered in the US. This has led to increased diversification within the Middle East towards investments in alternative sectors like tourism, technology and finance.
The central banks from both Saudi Arabia and UAE have both been collaborating on blockchain technology projects in the financial sector and are dabbling in crypto applications.Six commercial banks made up of three from each country participated in a joint CBDC project for 12 months called Project Aber, before releasing a report in 2020 with favorable results in regards to aspects of accuracy and settlement speeds.
The Saudi Central Bank and the Central Bank of UAE both agreed that the project tests for blockchain digital currencies were a success. Both countries reported that a dual-issued CBDC would be technically viable for cross border payments, as it would be an improvement over current centralized payment systems, like SWIFT, while significantly speeding up processing.
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