Saudi Arabia has taken a leap into the world of central bank digital currencies (CBDCs) by joining the mBridge project, a collaborative effort spearheaded by the Bank for International Settlements (BIS). This move signals the kingdom's growing interest in exploring futuristic forms of money and potentially revamping cross-border payment systems.
The mBridge project, launched in 2021, is a multi-central bank digital currency platform designed to streamline international transactions between commercial banks in participating countries. By becoming a "full participant, " Saudi Arabia joins a network that already includes China, Hong Kong, Thailand, and the United Arab Emirates.
This participation aligns with Saudi Arabia's ambition to establish itself as a financial hub in the region. Streamlining cross-border payments could incentivize foreign investment and trade, bolstering the kingdom's economic diversification efforts beyond its dependence on oil. Additionally, a CBDC could enhance domestic financial inclusion by providing a secure and accessible digital payment option for all citizens.
The mBridge project utilizes a platform compatible with the underlying code of China's digital yuan, e-CNY. While this has sparked speculation about a potential shift away from the US dollar's dominance in international trade, the project remains focused on experimentation and development. Saudi Arabia, along with the other participating nations, will have the opportunity to influence the design of the CBDC platform to suit their specific needs and regulatory frameworks.
Furthermore, the mBridge platform boasts compatibility with the Ethereum Virtual Machine, the software powering the Ethereum blockchain network. This integration broadens the project's reach by allowing for interoperability with existing blockchain technologies. This paves the way for exploring potential bridges between CBDCs and the broader digital asset ecosystem.
While the mBridge project is still in its early stages, Saudi Arabia's involvement marks a significant step towards realizing the potential of CBDCs. The project holds the promise of faster, cheaper, and more transparent cross-border payments, potentially revolutionizing international trade and finance. The kingdom's participation will not only benefit its own economic goals but also contribute valuable insights to the development of a global CBDC landscape.