Qatar’s Central Bank has been working on issuing its own central bank digital currency (CBDC). The country’s apex bank recently announced that it has completed the development of its central bank digital currency (CBDC) infrastructure.
Qatar’s Banking Industry
According to the IMF, Qatar’s banking sector is more internationally diversified compared to other Arab nations, with around 30% of deposits coming from foreigners. However, the sector is heavily concentrated, with Qatar National Bank holding a 56% market share of deposits.
Like several other Middle Eastern nations, Qatar’s Riyal is pegged to the US dollar. Last year, the Qatar Financial Centre Authority (QFCA) announced a collaboration with enterprise blockchain firm R3 to support the QFC’s use of distributed ledger technology (DLT) nationwide. This partnership established a lab environment to help commercial banks and fintechs experiment with DLT.
A recent IMF paper modeled the adoption of a retail CBDC in three Middle Eastern countries, including Qatar. Qatar was selected due to its high degree of digitalization, with cash comprising just 2.18% of the money supply. The paper concluded that if the CBDC were accessible to foreigners, it could reduce foreign deposits by up to 26%. While this reduction is seen as positive for financial stability, given the risk associated with dependence on foreign deposits, it might not be beneficial for the exchange rate.
Qatar’s CBDC Project
The first phase of the project is scheduled to continue until October. During this period, the central bank will concentrate on testing and developing specific applications of the CBDC, particularly for settling large payments involving both local and international banks. Both local and international banks will participate in the testing. Qatar’s CBDC project uses artificial intelligence, distributed ledger technology (DLT), and other emerging technologies.
The primary goals of the CBDC project include increasing domestic banks’ access to capital markets, improving domestic settlement processes, and enhancing the efficiency of securities transactions.
The CBDC project is not a standalone initiative but is closely integrated into Qatar’s broader strategic frameworks. It supports Qatar’s Third Financial Sector Strategy, the Fintech Strategy, and the Qatar National Vision 2030. These strategies collectively aim to build a resilient and innovative financial sector to support the country’s economic growth and development.
The CBDC project represents a key step towards building a digital economy. This shows the central bank’s dedication to keeping pace with the rapid digital transformations occurring globally.
Final Words
Qatar has joined the list of countries investing in CBDC. The country’s Central Bank recently announced this. Also, testing will begin in October.
Frequently Asked Questions
How many Central Banks are exploring CBDC?
There are over 100 countries exploring CBDC.
What is the Role of the Central Bank in Qatar?
Qatar’s Central Bank acts as the bank for all financial institutions in this country.
What Country Launched the World’s First CBDC?
The Bahamas was the first country to launch a CBDC.
Which Countries Have Launched CBDC?
Countries that have launched include Qatar, the UK, the Bahamas, Jamaica, China, Brazil, Nigeria, etc.
Who Benefits from CBDC?
Individuals, corporate bodies, and governments benefit from CBDCs.
Is Bitcoin a CBDC?
No, CBDC is not a CBDC.
Will CBDC Replace cash?
No, CBDC cannot replace cash.
