Bilateral Saudi, UAE Digital Currency Experiment Reveals Distributed Ledger Benefits
A digital currency (CBDC) pilot has been concluded by the central banks of Saudi Arabia and the United Arab Emirates (UAE). Both countries find that distributed ledger technology will enhance cross-border transactions and meet the demands of financial privacy in a strictly digital sense.
“The name Aber was chosen because it both captures the cross-border essence of the project, as the Arabic word for ‘crossing borders,’ as well as our expectation that it will also cross boundaries in terms of the use of technology,” the report reads.
The project was revealed in 2019 as part of the “Azzam” policy of Saudi Arabia and the UAE, an agreement to facilitate bilateral cooperation on this digital frontier.
Although the central banks say that more research is required, the Aber pilot contributes to the “knowledge body of CBDC and DLT technologies” that both countries currently need to develop. In particular, the study builds on previous CBDC experiments in Canada, Japan and Singapore, which were usually restricted rather than dual-issued CBDC to the single currency.
Six local commercial banks, in addition to the two central banks, ran nodes and contributed physical and real cash from reserves deposited at the central banks. The pilot was built on the open-source, licensed distributed ledger Hyperledger Fabric attached to the Linux Foundation and IBM. However, consideration was also given to JPMorgan’s Quorum, a private version of Ethereum, and R3’s Corda DTL scheme.
The report reads, “Note that public blockchain protocols such as Ripple and Stellar, often positioned for cross-border remittance use cases, were excluded because of the obvious need for authorization and privacy for an interbank payment use case (which was not supported by these protocols).”
Although the Aber project achieved “high-performance levels while not compromising security or privacy,” the scientists note that there were early problems integrating nodes throughout jurisdictions. Further concerns were posed and partially answered in the report about the finality of settlement and blockchain results, possible legal or political issues and operational risks.