The Saudi Central Bank says the ongoing CBDC experiment is focused on domestic wholesale use cases – fintech

Saudi Arabia's central bank digital currency (CBDC) experiment, conducted in collaboration with local banks and fintechs, is currently focused on domestic wholesale use cases, the central bank said. Meanwhile, the Saudi finance minister has said that CBDCs can be a “fantastic tool” that can be used by developing countries as a “social safety net.”

Local banks and fintechs are at the heart of Saudi Arabia’s digital currency project

The Saudi Central Bank (SAMA) said its digital currency experiment is underway and is currently “focused on domestic wholesale CBDC [central bank digital currency] use cases in collaboration with local banks and fintechs.” Additionally, during this testing phase, SAMA will examine the likely impact of a CBDC-based payment system on the economy as well as market readiness.

Fahad Almubarak, the governor of SAMA, outlined the central bank’s CBDC approach, claiming that local banks and payment companies “will always be a cornerstone of this project and its implementation.” To support this claim, a statement from the central bank on January 23 said that SAMA has already engaged local banks, fintechs and technology providers to better understand the functions of a CBDC as well as the various design options available.

Although SAMA has vowed to continue its research on CBDCs, it still emphasized in the statement that “no decision has been made regarding the introduction of CBDCs in the Kingdom.” According to the statement, SAMA wants to make an informed decision and therefore intends to “further study the benefits and potential risks of implementing CBDC.”

CBDCs require privacy compromises

Despite the central bank's seemingly cautious approach, the country's Finance Minister Mohammed Al-Jadaan recently praised CBDCs, which he sees as a useful tool for developing countries. According to his remarks during a World Economic Forum meeting The Saudi minister also sees CBDCs being used to promote social agendas.

“For me, CBDCs would be a fantastic tool, at least for developing countries, to provide a social safety net, for example,” Al-Jadaan said.

However, the Saudi minister acknowledged that while CBDCs can achieve a lot, they will come at a price – a trade-off in terms of privacy.

Meanwhile, the Saudi central bank said in its statement that the ongoing CBDC experiment will also explore the possibility of using the digital currency as an “infrastructure enabler of innovation in financial services that has the potential to contribute to a more resilient payments ecosystem.”

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer from Zimbabwe. He has written extensively about the economic struggles of some African countries, as well as how digital currencies can provide an escape route for Africans.

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