Saudi Arabia’s central bank (SAMA) has stated that it will continue to monitor the developments in the central bank digital currency (CBDC) space over the coming months through several experiments.
The banking regulator disclosed in a press release that it will focus on exploring the potential of a wholesale CBDC offering to rejuvenate the local payments ecosystem. SAMA noted that the early stages of the experiments would involve reviewing the legal implications of a potential launch and a brief foray into the technical aspects.
“During this phase of the project, SAMA seeks to explore the CBDC’s economic impact, market readiness, and potential robust and fast applications of a CBDC-based payment solution,” the bank said.
Since local financial institutions are the “cornerstone” of the project, SAMA revealed that the initial experiments would involve collaboration from Saudi Arabian banks and fintech firms. The central bank stated that it would be integral in helping it understand the real-world applicability of CBDCs and alternative design options.
SAMA announced that its plans are only experimental, and there is no intent to launch the digital iteration of the Saudi Riyal at the moment. Instead, the central bank remarked that it would be focusing on the developments in the ecosystem to enable it to make the right decisions for an eventual launch.
“SAMA stresses that although no decision has been made regarding the introduction of CBDC in the Kingdom, it continues to focus on exploring the benefits and potential risks of implementing CBDC. This will contribute to informed decision-making within SAMA and to CBDC explorations within the central banking community,” the bank’s statement read.
SAMA’s interest in CBDCs runs deep as the bank ran a collaborative study with the UAE’s central bank, Project Aber, back in 2019. By the end of the study, both central banks agreed on the viability of a CBDC with cross-border functionality for Gulf countries.
The race gets even tighter
The race among central banks to introduce CBDCs has been heated over the last few years, with a flurry of nations throwing their hats in the ring. BIS released a report in May 2022 indicating that 90% of surveyed central banks from October to December 2021 “is engaged in some form of CBDC work.”
Nigeria and the Bahamas are among the countries to have achieved a full-scale launch but with varying degrees of success.
China’s digital yuan has attained the status of being the most widely anticipated CBDC, given the sheer scale of the pilot and the transaction volumes attained over the last 12 months.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Blockchain in Middle East & South Asia
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