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There is currently a central bank digital currency (CBDC) experiment ongoing in Saudi Arabia, which is being carried out by the central bank in conjunction with fintechs and local banks.
The central bank revealed that the CBDC they are experimenting with is currently focused on wholesale use cases domestically.
Meanwhile, the Minister of Finance in Saudi Arabia said that these digital currencies were an excellent tool that could help developing countries in using them as a ‘social safety net’.
CBDC experiment
The Saudi Central Bank (SAMA) recently said that it was working on its central bank digital currency (CBDC) in collaboration with local fintechs and banks.
It further added that they were focusing on developing a wholesale CBDC for now and not a retail one. It added that during the testing phase, they would also examine a payment system based on the CBDC.
SAMA said that they would examine the impact of this system on the economy and also determine the readiness of the market.
Even though SAMA said that it would not put a stop to its CBDC research, it did emphasize that it had not come to a decision about introducing digital currency in the country.
The statement said that the central bank would continue exploring the potential risks and benefits associated with the implementation of a CBDC because they prefer making an informed decision.
Social Agenda
Even though a cautious approach has been taken by the central bank, the Minister of Finance of Saudi Arabia, Mohammad Al-Jadaan recently talked about CBDCs.
He stated that developing countries can find them to be very useful. During a session at the World Economic Forum, he said that social agendas could also find central bank digital currencies (CBDCs) useful.
The Saudi minister stated that in his opinion, CBDCs would function as a social safety net for developing countries and could be extremely helpful in different situations.
Privacy compromise
But, Al-Jadaan also acknowledged that while there was a myriad of benefits that CBDCs can offer, they also come at a cost. He said that privacy would be compromised in the use of digital currencies.
Meanwhile, the Saudi central bank mentioned in its statement that during the CBDC experiment, they would also explore the possibility of using the currency for innovating financial services.
It said that their aim was to focus on innovations that could help in building a more resilient payment ecosystem for the kingdom.
It should be noted that Saudi Arabia is not the only country working and experimenting with a central bank digital currency (CBDC).
Many countries all over the world are exploring the idea of developing their own digital currencies, but for different purposes.
Some central banks are more focused on developing a CBDC for wholesale use, while others are looking into retail. But, some have also opted to research both.
China has made a great deal of progress in terms of CBDC development and Russia has also accelerated its efforts to develop its own digital ruble.
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