The new Saudi central bank CBCD project
The Saudi Central Bank (SAMA) is increasing its investigation into central bank digital currencies (CBDCs). However, a release date has yet to be announced.
The very first releases from the Saudi government
In a January 23rd newsletter, the bank of Saudi indicated that it was focusing on the part of the initiative that “tends to concentrate on national market CBDC values scenarios in partnership with regional banks and financial technology.”
Nevertheless, it is noted that a concluding decision has yet to be made to create such a virtual currency in the Middle Eastern country.
SAMA emphasises that while a conclusion has yet to be reached about implementing CBDC in the Kingdom, it will investigate the advantages and possible downsides of CBDC adoption.
SAMA is investigating the financial consequences, industry feasibility, and uses of a CBDC-based pricing structure of a digital currency for the government. It also seeks to examine political, judicial, and legal requirements.
SAMA chairman H.E. Fahad Almubarak stated that, regional banks and financial organisations would be significantly engage in the CBDC program and execution,
Saudi plan for 2030 on CBCD
The decision is an aspect of Saudi Strategy 2030, a plan to develop the kingdom’s economic system and promote civil utility areas such as healthcare, education, construction, entertainment, and the tourist industry.
Saudi collaboration with the central bank of the Emirates
In 2019, SAMA completed “Project Aber,” a CBDC research. It collaborated with the Central Bank of the United Arab Emirates to investigate if Blockchain technology may help with multi-dimensional payments.
In late 2020, the banks submitted a statement summarising their results, saying that a dual-issued CBDC was possible for cross-border transactions and offered “substantial enhancement on centralised payment systems in the sense of structural stability.”
The Saudi CBDC did not release the investigation result of the recent research. However, CBDC Tracker believes it is built on the Linux Foundation’s open-source Blockchain framework, Hyperledger Fabric.
What is the Hyperledger Fabric?
A Hyperledger Fabric network comprises various groups (or participants) communicating with one another over the web. For example, an organisation might be a funding institute in a network of banking institutes or a transportation company in a supply chain network. From the standpoint of Fabric components, each organisation has a Fabric qualification holder and one or more partner terminals. A Fabric network also contains a purchasing system typical to all companies in the network, and this element supports the execution of network transactions.
Firms having accessibility to the Blockchain on a Fabric network may see the same unchangeable info, which ensures responsibility and lowers the danger of imitation. Furthermore, manufacturing changes are updating to the database in real-time, making monitoring authenticity during situations such as stockouts or food poisoning epidemics easier and quicker.
What is the project, Aber?
In 2019, the central banks of two Middle East’s countries presented a study today on an annual collaborative central bank digital currency (CBDC) experiment — and the achievements reflect positively on Blockchain technology.
Project Aber, officially revealed in January 2019, was a collaborative project between the UAE and Saudi Arabia to build a “proof of concept” to “build the skeleton of knowledge in CBDC and DLT technologies.”
The project name Aber, chosen in Arabic, means “stepping out of the borders”. It also conveys the program’s cross-border aspect and our expectation that it would likewise break borders regarding technological utilisation.
According to the survey, the experiment used a cryptocurrency supported by fiat currency to impose a “larger evaluation” of challenges involving reliability and current payment services, which was divided into three separate stages that gradually enlarged the context of the test to six different financial institutions.
The result of the Aber Project
The document states that a double-issued CBDC is “not simply theoretically practical” for cross-border transactions but that CBDCs offer a “substantial advantage over centralised payment systems in regards to structural adaptability.”
Middle east and Saudi adopting crypto
Saudi Arabia is a significant market for crypto due to the country’s good legal framework, the vast range of users, and growing attention to digital currencies.
This country is a significant marketplace for virtual currencies due to its incredible level of implementation and acceptance, showing the opportunity for growth in the Middle East and North (MENA) area.
Around 3 million Saudi People (or 14% of the total market aged 18 to 60) have turned crypto traders, with cryptocurrencies either presently owned or purchased in the previous six months as of May 2022.
Another 17% are crypto-curious and intend to participate in cryptocurrencies in the coming six months. Possible crypto traders have long-term enthusiasm in the Arab nation. In the first four months of 2022, 49% of crypto traders planned to raise their cryptocurrency stake during the next six months.
Whereas the Kingdom of Saudi Arabia has not established any legislation regarding cryptocurrencies, the administration welcomes crypto-assets and Blockchain innovation.
The Saudi Central Bank (SAMA) is investigating the potential benefits and drawbacks of implementing a central bank digital currency (CBDC). SAMA is exploring the financial, political, and legal implications of a CBDC-based pricing structure. The investigation is part of Saudi Arabia’s plan to develop its economy and promote growth in the healthcare, education, and tourism industries. SAMA previously collaborated with the Central Bank of the United Arab Emirates on “Project Aber,” a research project on CBDCs, which found that a dual-issued CBDC was possible for cross-border transactions and offered advantages over centralised payment systems.