The Banking The Banking Executive Magazine - June 2024 Issue

ISSUE 186 JUNE 2024 the BANKING EXECUTIVE 49 FinTech and AI Chornicle ture use cases will be identified after the pilot phase is completed, either by developing retail use cases or continuing to expand use cases for settling high-value payments, he added. The pilot phase will see the launch of a special platform for participating banks to conduct digital transactions. The digital currency account feeding process will be conducted by trans- ferring Qatari riyals to the platform - one Qatari riyal for one digital cur- rency (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 ex- perimental environment. On 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 fixing the ex- change 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 in- clude four use cases with local and international banks. The first use case will be settling payments between banks using digital currency, which will increase efficiency and reduce the risks associated with using cur- rent systems. The second use case is purchasing securities using digital currency, while the third case is sell- ing and trading securities between banks using digital currency, and the fourth case is using artificial intelli- gence technology to predict liquidity levels, which will help Qatar Central Bank to understand and study further the risks of using digital currency. The first phase will extend until Oc- tober of this year. After that, the re- sults will be evaluated and future use cases will be identified, whether by developing retail use cases or contin- uing to expand use cases for settling high-value payments, he added. The Assistant Governor for Financial Instruments and Payment Systems re- viewed reasons for launching the digital currency project, which in- clude the continuous technological progress that has been reflected in various aspects related to financial technology; noting that Qatar Central Bank is keen on keeping 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 Cen- tral Bank (QCB) Sheikh Ahmed bin Khalid Al-Thani discussed the goals of the digital currency project, which aims to explore, understand, and en- sure the readiness of Qatar’s finan- cial infrastructure for innovative technologies like central bank digital currencies (CBDCs). This initiative will facilitate both domestic and in- ternational transactions to digitalize. With most countries worldwide re- searching CBDCs, it represents ap- proximately 98 percent of global GDP, he noted. There is a great disparity in the level of progress achieved regarding the is- suance of CBDCs, he highlighted. For QCB, studies on the impacts of issuing a digital currency have been completed. The next step involves experimenting with and simulating the effects of issuing this currency. The primary goal of this phase is to understand the impact of a digital currency on daily transactions be- tween banks, which are inherently of high value and have significant fi- nancial implications. The results of this experiment and its evaluation, expected by October this year, will inform further expansion and addi- tional use cases, he said. Sheikh Ahmed bin Khalid Al-Thani explained the types of digital curren- cies and QCBs stance on them, cate- gorizing them into three recognized types that all use similar technology for instant money transfer. The first type is the central bank digital cur- rency, which is issued by the central bank and backed by cash reserves, carrying a legal obligation on the central bank. The second type is sta- blecoins, issued by private compa- nies, and the third type is cryptocurrencies. QCB has previ- ously issued circulars prohibiting the trading of stablecoins and cryptocur- rencies as they are not issued by a central bank. Regarding the digital currency pro- ject's future plans for its development and expansion to other countries, he mentioned that there are several ex- isting projects between certain coun- tries; however, QCB has not yet participated in any such projects but is closely monitoring developments. Expansion plans will be evaluated based on the results of the local ex- periment and ongoing international projects. Concluding his statements, the Assis- tant Governor for Financial Instru- ments and Payment Systems at QCB affirmed that the launch of the digital currency project will bring numerous benefits to Qatar’s financial sector, stating that QCB focuses on explor- ing these matters and determining what is suitable for Qatar’s economy. QCB also aims to adopt innovative technologies such as artificial intelli- gence and assess the possibility of in- tegrating them within the financial sector to achieve the objectives of the Third Financial Sector Strategic Plan.