The Qatar Central Bank (QCB) has provided a comprehensive explanation of its Central Bank Digital Currency (CBDC) project on its website. The project, set to commence before the end of 2024, will initially focus on a wholesale CBDC (wCBDC) utilizing Artificial Intelligence (AI) and will involve simulations rather than real Qatari Riyals.
The QCB’s project will initially focus on wholesale CBDC but may extend to retail in the future. The wCBDC could be used for the efficient settlement of ownership of financial digital securities. The QCB stated, “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, which will provide fungibility between traditional financial securities infrastructure and the new digital form.
Selected local banks will participate in the wCBDC project under the control of the QCB. Participant banks can acquire wCBDC by converting traditional QAR in an RTGS settlement account to wCBDC on a 1:1 basis, ensuring no impact on the banks’ or QCB’s balance sheets.
In the first phase, QCB will conduct initial experimentation and evaluate the results with participant banks before deciding on further steps. The program will use Distributed Ledger Technology (DLT) to align with Qatari laws and regulations.
The initial phase of the project is a simulation and does not involve real money. The program is designed to be neutral to monetary policy if deployed with real money in the future. Commercial banks can benefit from CBDCs for instant 24/7 interbank payments and DvP transactions. They can also issue tokenized deposits backed by fiat money deposits for payment and treasury operations.
The CBDC project will leverage AI technology to develop a liquidity forecasting model, helping banks manage their liquidity positions. During the first phase, commercial banks will explore use cases such as instant 24/7 bilateral settlement of payments and transfers in CBDC, and the purchase of digital securities settled with CBDC.