Saudi Arabia joins central bank digital currency project mBridge

Image credit: Jeremy Suyker/ Getty Images

Saudi Arabia has joined China and the UAE in a multi-country central bank digital currency (CBDC) initiative, as part of the kingdom’s broader strategy to modernise payments with new functionality and provide an alternative to physical cash.

The Bank for International Settlements (BIS), a global central bank umbrella organisation which oversees the Project mBridge, said Saudi Arabia is joining China and the UAE as a “full participant”.

The CBDC initiative is a project that was launched in 2021 to pilot cross-border payments in digital currencies issued by central banks of China, Hong Kong, Thailand and the UAE.

Saudi Central Bank said it has been evaluating the feasibility of using wholesale CBDC to boost the effectiveness of cross-border payment and settlement between commercial banks.

Project mBridge was launched to facilitate faster and more affordable cross-border payments, particularly in regions with limited access to the global financial system, according to BIS.

The project seeks to address financial inclusion concerns, particularly in jurisdictions where correspondent banking has been in retreat, causing additional costs and delays.

The mBridge transactions can use the code on which China’s e-yuan is built. This code is available to the project’s 26 other “observing members”, including the New York branch of the Federal Reserve, the International Monetary Fund, and the European Central Bank.

The BIS said the mBridge platform is now compatible with the Ethereum Virtual Machine – a piece of software that forms the backbone of the network used by the ether cryptocurrency. Compatibility with Ethereum allows it to be a testbed for add-on technology solutions, new use cases and interoperability.

Meanwhile, the UAE central bank said the mBridge platform is a key initiative under its Financial Infrastructure Transformation programme that seeks to accelerate digital transformation in the country’s financial services sector.

“By collaborating with our international partners, we aim to contribute to the development of a more robust, efficient, economical, interconnected and instant global payments infrastructure that benefits all participants, while maintaining the highest security standards,” said Khaled Mohamed Balama, the governor of the Central Bank of the UAE.

The deployment, testing and launch of the mBridge minimum viable product come as part of the UAE central bank’s phase 1 implementation of its CBDC strategy, supported by the use of the Digital Dirham.

Read: Central Bank of UAE launches multi-CBDC platform for cross-border payments