(Kitco News) - The Saudi Central Bank (SAMA) has provided an update on its exploration of the creation of its own central bank digital currency (CBDC) – the digital riyal – saying that it continues to focus on the development of a domestic wholesale CBDC (wCBDC) use case in collaboration with local banks and fintechs.
“During this phase of the project, SAMA seeks to explore CBDC economic impact, market readiness, and potential robust and fast applications of a CBDC-based payment solution,” the central bank said.
SAMA is also in the process of reviewing policy, legal and regulatory considerations before it moves on to the next phases of its CBDC investigation within the context of the objectives of Saudi Vision 2030. The goal of the SV 2030 initiative is to reduce the kingdom’s dependence on oil, diversify its economy and develop public service sectors such as health, education, infrastructure, recreation and tourism.
The central bank has engaged with local banks, fintechs, third-party consulting and technology providers and other market players to gain a better understanding of the CBDC’s functionality and to test various design options.
According to Fahad Almubarak, the Governor of SAMA H.E., “local banks and payment companies will always be a cornerstone of this project and its implementation.”
As the central bank continues its CBDC research, it also plans to consult “with relative international bodies, local government entities and the public.”
“Additionally, SAMA will continue to experiment on CBDC solution as an infrastructure enabler of innovation in financial services that has the potential to contribute to a more resilient payment ecosystem and accelerate digital transformation in the local financial sector,” the central bank wrote.
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At this point, the decision on whether or not to release a CBDC in the Kingdom is still open for debate as SAMA continues to explore the pros and cons of doing so.
“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 announcement concluded.
In 2019, SAMA successfully conducted a CBDC experiment called “Project Aber” in which it worked with the Central Bank of the UAE to examine whether distributed ledger technology could contribute to seamless cross-border payments.
The final report on the findings of that project concluded that “a cross-border dual issued currency was technically viable and that it was possible to design a distributed payment system that offers the two countries significant improvement over centralized payment systems in terms of architectural resilience.”
