Saudi Arabia has joined Chinese-led Project mBridge, a cross-border experiment for central bank digital currency (CBDC) for international trade. The Saudi Central Bank joins the initiative as a “full participant,” according to an announcement by the Bank for International Settlements (BIS).
Also read: BRICS Watch: When can we expect Saudi Arabia’s entry?
This is part of the country’s broader initiative to modernize payment systems and could reduce over-reliance on cash as well as lead to less of the world’s oil traded in US dollars.
Launched in 2021, Project mBridge is a collaboration between central banks of China, Thailand, Hong Kong, and the United Arab Emirates (UAE) which seeks to modernize payments and offer alternatives to physical cash.
The platform is expected to scale up commodity settlement
The BIS also indicated that Project mBridge has reached the “minimum viable product” phase, and invited private financial firms to “propose new solutions and new cases that help develop the platform and showcase all its potential.”
According to a Reuters report, an estimated 135 countries and currency unions that makeup about 98% of global GDP are exploring CBDCs but use technology that makes cross-border movements challenging and politically sensitive.
Josh Lipsky who runs a global CBDC tracker said:
“The most advanced cross-border CBDC project just added a major G20 economy and the largest oil exporter in the world.”
“This means in the coming year you can expect to see a scaling up of commodity settlement on the new platform outside of dollars -something that was already underway between China and Saudi Arabia but now has new technology behind it,” added Lipsky.
Saudi Central Bank highlighted it has been evaluating the feasibility of using wholesale CBDC to boost cross-border payment and settlement between commercial banks.
Global financial institutions support the mBridge
The BIS also indicated the platform is now compatible with Ethereum Virtual Machine, a software that backs the network Ether cryptocurrency uses.
Also read: The debate over Central Bank Digital Currencies (CBDCs): Assessing benefits and concerns
Apart from its six full participants, mBridge also has 27 other institutions including the International Monetary Fund (IMF), the World Bank, central banks of Norway, Turkey, and South Korea, who signed up as observers to the project.
Goldman Sachs, HSBC, and China’s six biggest state-owned banks are also working on the project.
Project mBridge was launched to facilitate faster and affordable cross-border payments as well as to foster financial inclusion , especially in areas where correspondent banking is a challenge, creating additional costs and delays.
Cryptopolitan reporting by Enacy Mapakame
