Saudi Arabia Joins China-led Central Bank Digital Currencies Trial

Saudi Arabia Joins China-led Central Bank Digital Currencies Trial

By Staff Writer, 06 June 2024

Saudi Arabia has officially joined a central bank digital currency (CBDC) cross-border trial led by China, marking a potential shift in the global oil trade's reliance on the U.S. dollar. Announced by the Bank for International Settlements (BIS) on Wednesday (Jun 5), Saudi Arabia's central bank will now be a "full participant" in Project mBridge, a collaboration initiated in 2021 between the central banks of China, Hong Kong, Thailand, and the United Arab Emirates.

The BIS, a global umbrella organization for central banks overseeing the project, also revealed that mBridge has reached the "minimum viable product" stage, allowing it to move beyond the prototype phase.

With around 135 countries and currency unions, representing 98% of global GDP, exploring CBDCs, the implementation of these new technologies for cross-border transactions remains both technically challenging and politically sensitive.

"The most advanced cross-border CBDC project just added a major G20 economy and the largest oil exporter in the world," commented Josh Lipsky of the Atlantic Council, which tracks global CBDC developments. He noted that this development could accelerate commodity settlements on the platform outside of the U.S. dollar, a trend already progressing between China and Saudi Arabia.

mBridge transactions can leverage the code underpinning China's e-yuan, which is also accessible 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.

Additionally, the BIS announced that the mBridge platform is now compatible with the Ethereum Virtual Machine, the software infrastructure supporting the Ether cryptocurrency, enhancing its potential as a testing ground for future developments.

Source: Marc Jones / Reuters

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