First phase of digital currency in Qatar to extend until October 2024

Doha, Qatar: Assistant Governor for Financial Instruments and Payment Systems at Qatar Central Bank Sheikh Ahmed bin Khalid Al-Thani revealed that the pilot phase of the digital currency project, which will last until October, will involve Qatar Central Bank and the banks participating in the experiment of settling high-value payments.

Speaking to Qatar News Agency (QNA), Sheikh Ahmed bin Khalid Al-Thani noted that QCB has developed four use cases with local and international banks by issuing and settling securities using digital currency.

The results will be evaluated and future use cases will be identified after the pilot phase is completed, either by developing retail use cases or continuing to expand use cases to settle high-value payments, he added.

The pilot phase will introduce a special platform for participating banks to conduct digital transactions. The feeding process for digital currency accounts will be performed by transferring Qatari riyal to the platform – one Qatari riyal for one digital currency (1:1). The banks participating in the pilot phase will be able to trade, buy and sell financial assets using the digital currency in an experimental environment.

About the project beneficiaries, Sheikh Ahmed bin Khalid Al-Thani said the concept of the digital currency itself is broad. It is a means of payment used for goods and services, and for Qatar Central Bank, the value of the Qatari riyal is based on setting the exchange rate against the US dollar. In simple terms, the currency can be used as a means of payment between individuals, and these transactions are called retail payments or low value transactions. It can also be used between banks and with Qatar Central Bank, and these transactions are called wholesale payments or high value transactions. Finally, the currency can be used across borders through transfers outside the country. In this case, the local currency will be converted into a foreign currency at the market exchange rate.

He noted that the first phase will include four use cases at local and international banks. The first use case will settle payments between banks using digital currency, which will increase efficiency and reduce the risks associated with using current systems. The second case is the purchase of securities using digital currency, while the third case is the sale and trading of securities between banks using digital currency, and the fourth case is the use of artificial intelligence technology to predict liquidity levels, which Qatar Central Bank will help to understand and study further the risks of using digital currency.

The first phase will last until October this year. After that, the results will be evaluated and future use cases will be identified, either by developing retail use cases or continuing to expand use cases for settling high-value payments, he added.

The Assistant Governor for Financial Instruments and Payment Systems reviewed reasons for the launch of the digital currency project, which included the continuous technological advances reflected in various aspects related to financial technology; noting that Qatar Central Bank is keen to keep pace with these changes to ensure that the Qatari economy is well prepared for the future. In his statements to QNA, Assistant Governor for Financial Instruments and Payment Systems at Qatar Central Bank (QCB) Sheikh Ahmed bin Khalid Al-Thani discussed the objectives of the digital currency project, which aims to improve the readiness of Qatar’s financial infrastructure for innovative explore, understand and secure technologies such as central bank digital currencies (CBDCs). This initiative will facilitate digitization of both domestic and international transactions. With most countries worldwide exploring CBDCs, it represents about 98 percent of global GDP, he noted.

There is a huge difference in the level of progress achieved with regard to the issuance of CBDCs, he highlighted. For QCB, studies on the impact of issuing a digital currency have been completed. The next step involves experimenting with and simulating the consequences of issuing this currency. The primary objective of this phase is to understand the impact of a digital currency on day-to-day transactions between banks, which are inherently high-value and have significant financial implications. The results of this experiment and its evaluation, expected by October this year, will inform further expansion and additional use cases, he said.

Sheikh Ahmed bin Khalid Al-Thani explained the types of digital currencies and QCBs’ position on them, categorizing them into three recognized types that all use similar technology for instant money transfer. The first type is the central bank digital currency, which is issued by the central bank and backed by cash reserves, which carries a legal obligation on the central bank. The second type is stablecoins, issued by private companies, and the third type is cryptocurrencies. QCB has previously issued circulars banning the trading of stablecoins and cryptocurrencies as they are not issued by a central bank.

Regarding the digital currency project’s future plans for the development and expansion to other countries, he mentioned that there are several existing projects between certain countries; However, QCB has not yet participated in any such projects, but is keeping a close eye on developments. Expansion plans will be evaluated based on the results of the local experiment and ongoing international projects.

Concluding his remarks, the Assistant Governor for Financial Instruments and Payment Systems at QCB confirmed that the launch of the digital currency project will bring numerous benefits to Qatar’s financial sector, stating that QCB is focusing on investigating these matters and determining what suitable for Qatar’s economy. QCB also aims to adopt innovative technologies such as artificial intelligence and evaluate the possibility of integrating them within the financial sector to achieve the objectives of the Third Financial Sector Strategic Plan.