The Arab World's Path to CBDC

How Arab banks are laying the groundwork for digital currencies. Let's take a closer look at where different Arab central banks are relative to their CBDC goals.

A cover image for the article "The Arab World's Path to CBDC"

If you have been following the growing field of CBDC, you are likely already familiar with the well-known statistic that 86% of central banks are actively looking into its various applications.

It is one of the most revealing statistics on where we can expect digital currencies to grow. 

While there are countless reasons why both INDUSTRIA and the blockchain industry at large have thrown their hat into exploring, developing, and ultimately nurturing the digital heart-to-heart that financial institutions are currently having, it is also essential - and compelling -  to consider an additional aspect to CBDCs.

That aspect is a cross-border wholesale settlement, meaning that a select few countries band together, digitise their respective currencies, and offer all the perks of CBDC as a sort of broader network between participating countries.

There is the Digital Yuan, probably the most well-known project of its kind, Project Jura, a partnership between French and Swiss banks, the latter still using the franc, and DCash - the Eastern Caribbean Central Bank project, which includes a total of 8 territories.

In this article, we'll take a closer look at where different Arab central banks are relative to their CBDC goals.

INDUSTRIA's Contribution 

INDUSTRIA is implementing a CBDC sandbox in partnership with R3 for exploring and constructing digital currencies. Through our partnerships with local central banks, who provide us with insight into deployment patterns, local norms and governance laws and practices, an in-depth knowledge base, and additional training and certification for regional banks and companies.

Together, we aim to build on Arab central banks' expertise and provide them with the additional tools, knowledge, and technologies needed to help them digitally transform all levels of their financial spectrum.

On Central Bank Digital Currencies

Before focusing on what the Arab world is building, let’s discuss the three main aspects of CBDC - Wholesale, Retail, and Cross-Border:

  1. Wholesale CBDC is the foundation on which the others are built. It is the top-to-bottom digitisation of how central banks operate. Wholesale CBDC is significantly safer, faster, and cheaper than current banking systems.

  2. Retail CBDC is a further application, that allows a digital currency to be used by third-party companies within a country. An additional subset is Commercial CBDC, which applies to how individuals interact with their nation's digital currency through government-issued wallets. Both Retail and Commercial CBDC allow for additional transparency, safety, and access to modern banking services for people who might otherwise not have access to them.

  3. Finally, Cross-Border CBDC (mCBDC) can be put in place before or after a Retail CBDC. Cross-Border functionality allows central banks to settle payments outside their borders, as well as trade other digital currencies with partnering banks. 

CBDCs foster equality and innovation through healthy and regulated competition and optimise efficiency through all levels of a financial structure.

Aerial view of Dubai in low light

Aerial view of Dubai in low light

A Deeper Dive Into Multi-CBDC Arrangements

A BIS study on CBDC Cross-Border payments from March 2021 proposes three models for payment system interoperability: Compatible CBDC systems, interlinked CBDC systems, and a single system for mCBDC. 

For adapting compatible CBDC systems, the report clarifies that while this model is closest to how traditional banking systems operate, this solution is prone to the same issues.

The study argues that “without coordinated policy action, compatibility takes time. Experience has shown it takes years to coordinate participants in complex markets to move to common message standards [...] or align legal frameworks.”

A “clean slate” of sorts is a potential solution. A brand new set of systems could be built on existing practices, and private companies can promote competition with traditional cross-border payment methods.

Interlinking CBDC systems seems like a more robust solution, but it comes at the cost of increased complexity.

BIS offer an analogy: “Linking systems is [like] connecting water pipes with different pressures or flow rates. Simply joining them together will not work. Valves and controls are required: contractual and operational arrangements are the equivalent for payment systems.”

A shared technical interface is one way to remedy this complexity. Based on distinct agreements between participating systems, it would allow participants to make payments between each other using different digital currencies. 

Another solution would be to link CBDCs through distributed clearing houses. Participating central banks could also incorporate foreign exchange markets and hold some amount of each other’s digital currencies.

The third model, unifying CBDCs under a single, multi-currency system, seems to be the most elegant option.

Aligning both central banks and their respective digital currencies under the same governing principles, infrastructure, and ledger would allow for a significantly more efficient and integrated system. 

At the same time, coming to an agreement on how best to implement such a system is not an insignificant hurdle to get over, getting more complex the more countries are involved.

What Is Happening in the Arab Region

In January of this year, the Arab Monetary Fund (AMF) released an immense report covering a total of 17 Arab central banks - Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Yemen, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Tunisia, the Emirates.

The AMF's report features several polls on Arab central banks' interest and progress on various aspects of the CBDC process.

Table charting different Arab central banks' involvement in digital currency projects

Table: Arab central banks' involvement in digital currency projects

Of polled Arab central banks, 76% are currently studying opportunities to issue digital currencies. Two of them - Saudi Arabia and the UAE - are already engaged in Project Aber.

Additionally, 69% of Arab banks are still in the process of determining the type of digital currency they want to issue. In comparison, 25% are interested in administering more than one type of digital currency, including wholesale, hybrid and direct retail CBDCs.

More specifically, the Central Bank of Bahrain is looking into retail payments using CBDC, something they successfully tested back in 2018. They are currently working on their digital Bahraini dinar and performing tests using J. P. Morgan's JPM coin.

The Central Bank of Tunisia had also formed a committee to explore laws, monetary policies, and potential impacts on financial stability as part of its E-Dinar initiative. Currently, the Central Bank of Tunisia and the Bank of France are collaborating on a new CBDC experiment, and in July 2021, they completed a wire transfer between France and Tunisia. 

In the first half of 2021, the Central Bank of Egypt, headed by its Deputy Governor Tarek Amer, initiated a study on the technical and strategic aspects of central banks' digital currencies and their potential impact on the local economy and payment systems. 

Similarly, in February of 2021, Morocco also established a specialised committee to study the possibility of issuing a digital currency, supporting Bank Al-Maghrib's interest in CBDC. This effort is currently only considered for research purposes, and the bank is not aiming at launching a digital currency at any time soon.

Sudan and Kuwait are also exploring the feasibility of offering a digital currency, with Kuwait claiming that it could "be launched quickly by CBK should it choose to do so." 

Notable Projects

When discussing Arab CBDC projects, two merits demand more in-depth exploration.

Project Aber

The wonderfully poetic Aber, or "wanderer" in Arabic, is a fitting name for a project to see the two neighbouring countries of Saudi Arabia and the UAE explore and potentially build a digital currency together.

The countries' two central banks, the Saudi Central Bank (SAMA) and the Central Bank of the United Arab Emirates (CBUAE), started the collaboration in January 2019. Since then, Aber has become the leading project in the Arab world.

Project Aber is particularly noteworthy because, like Project Jura, it explores the relationship between multiple currencies, namely, the Saudi Riyal (SAR) and the Emirati Dirham (AED).

The project saw both currencies collated into the entirely new ABR, tied to the US Dollar (USD). In simple terms, ABR effectively manages the Riyal, the Dirham and the Dollar's conversion rates between each other.

Project Aber's November 2020 report sets expectations for what we might see in the future: to make the network safer and more efficient and potentially add additional currencies to the network. There is also significant interest in taking a crack at solving the regulatory challenges that the region faces. 

Both Saudi Arabia and the UAE envision Project Aber to be more than a partnership between the two countries, but to instead function as a launchpad for further collaboration and integration with neighbouring central banks.

Project mBridge

Of course, some headway is already being made in the direction of cross-border wholesale settlements through The Multiple CBDC Bridge, or mBridge, a cooperative project between Hong Kong, Thailand, the People's Republic of China, and the UAE. They are currently exploring the potentials of cross-border CBDC over longer distances.

Although a prototype, mBridge is currently entering its "Phase 3", increasing the scope of phases 1 & 2, which focused on testing the viability of a more extensive network. 

According to their October 2021 report, the objective of Phase 3 is to continue exploring the relationship between core banking systems and multi-party networks. An additional priority is the exploration of new policies, regulations, and legal requirements of CBDC adoption.

As of 2019, the total value of international trade transactions between mBridge participants is around $250M.


Arab nations are focusing their efforts on exploring and implementing digital currencies - between the prevention of money laundering, counteracting terrorism, increasing the efficiency of both retail, wholesale, regional, and international settlements, there is no longer any doubt that this is a direction the Arab world is very much interested in heading in.

The real-world issuance of a CBDC, of course, poses numerous challenges. The AMF report concludes that challenges exist at both the national and international levels.  

Within the Arab world, those challenges are mainly tied to a lack of available regulations, policies, and laws relating to establishing a digital currency - something that central banks need to be further explored before it is implemented.

Data privacy and cybersecurity concerns still need to be combed over for potential solutions and best practices.

Perhaps the most exciting aspect of the AMF report is that the Arab world's interests lay in strengthening the interrelationship between central banks. 

Launching regional CBDCs is only step one of revolutionising finance. As participants in the construction and implementation of the technology, we need to keep in mind that working together is what most would consider the original vision of a digital currency.

For these reasons, the Arab World's approach to CBDC is one to watch. How the different Arab countries solve both their internal applications for CBDC, in conjunction with how they potentially decide to interoperate, could set the stage for how the rest of the world transforms money going forward.


INDUSTRIA is a global technology consulting, development, and ventures company with expertise in the field of enterprise blockchain, confidential computing, process automation, and digital experience. As one of the official partners of R3, we are implementing cutting-edge blockchain technologies and reshaping the fintech world.

At INDUSTRIA, we are focused on providing permissioned blockchain solutions, such as Central Bank Digital Currencies, Electronic Bill of Lading, and Smart Legal Contracts. Our solutions apply to a wide range of industries and use cases to empower and modernise society.

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