The Saudi Central Bank (SAMA) is ramping up its research into Central Bank Digital Currencies (CBDCs) but is yet to announce a deployment.
In a Jan. 23 bulletin, the bank stated it was working on a phase of a project that “focuses on domestic wholesale CBDC use cases in collaboration with local banks and fintechs.”
However, it confirmed there had been no final decision to launch such a digital currency in the Middle Eastern nation.
“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.”
SAMA is researching several aspects of a state-issued digital currency including economic impact, market readiness, and the applications of a CBDC-based payment solution. It also intends to review policy, legal, and regulatory considerations.
The move is part of Saudi Vision 2030, an initiative to reduce the Kingdom’s dependence on oil, diversify its economy and develop public service sectors such as health, education, infrastructure, recreation, and tourism.
According to SAMA governor, H.E. Fahad Almubarak, local banks, and payment companies will be heavily involved in the CBDC project and implementation.
SAMA successfully conducted a CBDC experiment called “Project Aber” in 2019. It worked in collaboration with the Central Bank of the United Arab Emirates (UAE) to examine whether blockchain technology could contribute to cross-border payments.
The banks released a report on their findings in late 2020 concluding a dual-issued CBDC was technically viable for cross-border payments and presented “significant improvement over centralized payment systems in terms of architectural resilience.”
No details were provided on the technology behind the Saudi CBDC, but CBDC Tracker suggests it is based on the Linux Foundation’s Hyperledger Fabric.
According to the United States think tank Atlantic Council, there are currently 11 countries that have fully deployed a CBDC, and 17 are running pilots. Most of those that have launched are in the Caribbean with the exception of Nigeria.