Qatar Central Bank issues regulations for digital banks

The document defines the purpose of digital banks, the regulatory requirements for their operation, and the process for obtaining a Qatari digital banking licence. To secure a licence, prospective digital banks must demonstrate a commitment to expanding financial inclusion, particularly for unserved or underserved populations. 

Applicants are required to establish their headquarters in Qatar and ensure that a majority of their board members reside in the country. These provisions, along with stringent anti-money laundering (AML) and financial crime prevention measures, aim to reduce the risk of fraud and ensure accountability for financial institutions. 

The new framework addresses concerns often associated with digital banks, such as their vulnerability to fraud or collapse due to insufficient regulation and low entry barriers. By setting clear operational standards, the regulation aims to balance financial inclusion with system stability. The guidelines emphasize support for small and medium-sized enterprises (SMEs), which are frequently underserved by traditional banks.

Supporting financial inclusion 

In its statement, the QCB underscored the potential of digital banks to improve financial inclusion and provide accessible financial services. It highlighted their capacity to cater to diverse societal needs, including ensuring that SMEs have greater access to banking services. 

This move follows Qatar's earlier introduction of regulations on distributed ledger technology (DLT) and artificial intelligence in financial services. By publishing well-defined yet flexible legislation, Qatar is looking to position itself as an important player in the digital transformation of the financial sector. 

According to the Qatar Financial Centre Regulatory Authority, the Qatar National Financial Inclusion and Financial Literacy Strategy launched in 2018 under the leadership of the Governor of the Qatar Central Bank, His Excellency Sheikh Abdulla bin Saoud Al Thani. This strategy reaffirms the State of Qatar’s commitment to financial inclusion and efforts to introduce financial literacy at an early age. 

In developing the strategy, Qatar’s three financial regulators, namely the Qatar Central Bank, the Qatar Financial Markets Authority, and the QFC Regulatory Authority, took into account the Qatar National Vision 2030 along with the objectives of the National Development Strategy.