AFAQ NEWS
The launch of central bank digital currencies (CBDCs) in the Gulf region may take anywhere between two to five years, depending on the policy interest of various governments and central banks’ intention, according to Fintech expert Dr. Oriol Caudevilla.
Speaking at the International Financial Virtual Expo and Conference (iFEX Virtual Expo)—the first financial virtual expo in the MENA region—Caudevilla said that a joint study conducted by the central banks of Saudi Arabia and the UAE had already confirmed the viability of distributed ledger technology (DLT) as a mechanism for both domestic and cross-border settlements and the technical viability of a single digital currency issued by both central banks.
The study released in November 2020, known as Project Aber, also showed that it was possible to design a distributed payment system that offers a significant improvement over centralized payment systems. Six commercial banks participated in the project, three from Saudi and three from the UAE. “The performance objectives that were originally set for the project were exceeded, proving that DLT technologies could offer high levels of performance while not compromising safety or privacy,” noted Caudevilla.
However, Madarik Ventures CEO Amri Zakaria Abdu—also speaking at the conference—said that there are several challenges in adopting digital currency, including an increase in cybercrimes and lack of smartphones in several countries.
Lebanon, Egypt, and Turkey have also recently taken some initiatives in introducing digital currencies. Lebanese central bank governor Riad Salameh said in November 2020 that his country would issue a digital currency in 2022, according to its national news agency. According to Salameh, the launch of a digital currency could encourage $10 billion of cash stored in homes to be converted into digital currency. Turkey will begin piloting a previously undisclosed digital currency in the second half of 2021, the country’ central bank governor Naci Agbal told Members of the Parliament in late December 2020. Egypt announced its intention to explore the possibility of deploying a digital currency in December 2018.
Caudevilla explained that CBDC is a legal tender issued by apex banks in digital form, which is different from cryptocurrencies. CBDCs, which have some features of cryptocurrencies, may be of two types: wholesale and retail.
The COVID–19 pandemic has prompted several central banks to speed up their digital currency programs due to hygienic reasons. “(As many as) 80% of central banks in the world are doing some studies on digital currencies,” said Caudevilla. China, which started its program for introducing CBDC in 2014, is expected to launch its digital currency next year.
Other speakers at the iFEX virtual conference were Michael Stark, financial markets expert at Exness, Elhassan Baker, chief markets analysts at Evest and Ashraf Laidi, founder and CEO of Intermarket Strategy Ltd.
The two-day virtual event, organized by Afaq Group, brought together leading players in online trading, Fintech, payment gateways, and blockchain, as well as other technology providers.
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