Saudi Arabia’s central bank is working on new plans to introduce Central Bank Digital Currency (CBDC) in the Islamic nation. Several major economies are developing laws and regulations to introduce their own CBDCs. The central debate concerns CBDCs’ impact on economies and whether they could replace fiat currency.
The country’s national banking regulator Saudi Central Bank (SAMA) discussed new plans to introduce CBDC working towards the long-term goal of transitioning to a cashless nation. The central bank said it has to observe closely whether to introduce a CBDC.
“SAMA stressed that although no decision has been made regarding the introduction of CBDC in the kingdom, it focuses on exploring the benefits and potential risks of implementing CBDC.”
In 2019, SAMA collaborated with the UAE central bank to develop a project on CBDC called Project Aber. The project mainly examined how blockchain technology will help in cross-border payments. It also examined the relationship between currencies such as the Saudi Riyal and the Emirati Dirham.
SAMA has appointed Mohsen Al Zahrani to lead the Virtual Assets and CBDC program in September 2022. Recently, the Saudi British Bank (SABB) utilized blockchain technology to strengthen the “digitization of letters of credit.”
CBDC adoption across the world
According to the Atlantic Council, all G7 nations have moved into the development stage of their CBDC. In 2023, over 20 countries plan to introduce a CBDC in their respective nations. Australia, Thailand, Brazil, India, South Korea and Russia continue or begin pilot testing this year.
Evolution of crypto in Saudi Arabia
SAMA plays a major role in maintaining the country’s finances, the balance of payments (BOP) and external sector statistics. Earlier in 2018, SAMA alerted crypto users in trading digital currencies due to the volatile conditions in the crypto market.
Despite there being no laws on buying and trading digital assets in Saudi Arabia, there has been a rapid increase in virtual asset trading in the nation.
The Saudis have been working on tokenizing the real estate sector, and the administration is planning to introduce blockchain technology in the healthcare sector and supply chain.
A survey by the KuCoin exchange reported that three million Saudi Arabians, which form 14% of the population between 18 and 60, were either owing digital assets or trading the assets in the nation. Still, the usage of cryptocurrencies is controversial in Islamic countries. Religious scholars argue that trading cryptocurrencies is akin to gambling.
However, regional leaders across the nation have admitted blockchain technology and cryptocurrency will play a major role in alternative financing methods and cross-border payments.