In a step potentially rewriting the picture of global finance, Saudi Arabia and the UAE recently launched Project Aber on January 2019. A shared digital currency development and implementation joint project, it marks a giant step toward great financial system modernization of the GCC. The very apposite name “Aber” thus captures the essence of the project: to urge cross-border cooperation and push the boundaries of what is achievable through digital technology in the financial sector.

Using this initiative, an opportunity will come to leverage on the Distributed Ledger Technology (DLT) while introducing a CBDC that looks to make more efficient crossborder transactions. Through this project also, there are hopes of boosting economic integration that is expected at the level between Saudi Arabia and the UAE which will be some form of precedents for expanded financial cooperation and integration within GCC and beyond

What is project Aber?

The Project Aber is a new digital currency initiative by the Saudi Central Bank (SAMA) and the Central Bank of the UAE (CBUAE). This collaboration aims to determine how a common digital currency can be used domestically within the region and internationally. Using DLT, Project Aber not only develops more secure and efficient payment systems but also opens up an environment for further future integration of digital currencies within the region.

This is an initiative to make financial interaction smooth, deepen the economic cooperation between two nations, and set an example for other countries launching similar projects regarding their digital currencies. Aber assumes a revolution in payment infrastructures, ensuring that they both are fast and secure, by bringing state-of-the-art technologies into traditional banking systems.

Project Aber Objectives

Project Aber was initiated with clear objectives guiding its development. These objectives are as follows:

Improvement of Cross Border Payments: Aber looks to address the inefficiencies that characterize conventional interbank cross-border payment systems, thereby achieving faster transaction and lower costs.

Exploring Dual Issuance of Central Bank Digital Currencies (CBDCs): This part of the project explores the possibility of issuing a digital currency jointly by two central banks, a pioneering concept that could change how digital currencies are issued and controlled in the future.

Benchmarking with International Standards: Project Aber results and implementations are being compared against the similar undertakings from the central banks across the world. This helps in putting the UAE and Saudi Arabia in the fore-front of international race to transform payments systems into a modern status quo.

Organization Structure of Project Aber

Project Aber is an implementation that falls under a structure with three main phases, one focusing on every different aspect related to the use and application of this digital currency.

It entails Cross-Border Settlements between central banks.

Central banks of the concerned countries, specifically Saudi Arabia, were involved at the first level and it was in the initial round for testing their feasibility in implementing the digital money in high value cross-border transfers between the respective countries.

Domestic Settlements between Commercial Banks:

In the second phase, the project was expanded to include domestic settlements. Commercial banks in both countries tested the digital currency for the purpose of local settlement and considered its ability to streamline local settlements.

Cross-Border Transactions Between Commercial Banks:

In the third and final stage, the project tested the ability of commercial banks in both countries to use the digital currency for cross-border transactions.

Key Features of Project Aber

Project Aber features an exciting financial collaboration mode as well as an emphasis on leveraging new technology. Some key features of this project include

Active Participation of Commercial Banks:

The project had six commercial banks, three from each country. These were actively involved in testing the new digital currency system to ensure it met the practical needs of the banks and their customers.

This core feature of the project is actually decentralized.

By doing this architecture, the design will be distributed and thus giving the flexibility for banks to do their system on their own yet keeping security intact and sound across the entire network.

Liquidity Issues:

One of the aims of Project Aber is to minimize the problems caused by “trapped liquidity” for banks. In this respect, the project simplifies cross-border payments and helps banks handle liquidity better, which has been one of the main problems in international transactions for many years.

Guiding Principles of Project Aber

To make the project successful, there were a few guiding principles:

It was constructed on the active engagement of commercial banks. The local nodes running on the network were tasks for the commercial banks. Thus, through such, it builds private-public sector cooperation to understand better the technical and business aspects of DLT.

Actual monetary transactions. Such was the element of realism created when actual monies were being used in this project, in developing tests to evaluate system functionality and work under normal real-life circumstances. In doing so, its feasibility was determined vis-à-vis already set existing infrastructures about the Real-Time Gross Settlement Systems prevalent in UAE and Saudi.

Achievements and Findings

Since the launch of Project Aber, a lot has happened in proving the feasibility and potential of using digital currencies for cross-border and domestic transactions. Some of the key findings and achievements of the project include:

Operational Feasibility of DLT for Payments: The project successfully demonstrated that Distributed Ledger Technology can be effectively used for secure and efficient cross-border and domestic payments.

Technical and Security Insights: Aber also shared valuable insights regarding the technical and security aspects required to establish a CBDC. This would involve the issue of scalability and speed of transactions as well as security measures for preventing frauds and ensuring the integrity of the system.

Bank and Central Bank Collaboration: The project demonstrated how central banks and commercial banks can collaborate to take advantage of emerging technologies. In doing so, the public and private sectors can come together to advance innovation in the financial sector.

Project Aber has introduced a new norm in the digital currency and payment solution development agenda. Its efforts on collaboration, innovation, and practical application make it an excellent case to be followed for other nations venturing into a similar initiative.

Conclusion

As the project Aber matures, this project will shape the future direction of finance-a greater integration among and between partners within the GCC and beyond-in shaping a faster, more efficient, secure, and digitally developed global financial system by way of an unprecedented initiative made by Saudi Arabia and the United Arab Emirates.