Saudi Arabia has joined a group of countries seeking to trial cryptocurrencies for cross-border central banks dominated by China.
This may be another step towards reducing dealing with the US dollar.
Under the move, announced by the Bank for International Settlements on Wednesday, the Saudi Central Bank will be a full participant in the mBridge project.
It’s a cooperation that was launched in 2021 between the intermediary banks of China, Hong Kong, Thailand, and UAE.
The Bank for International Settlements, a global financial institution owned by member central banks that oversees the digital currency pilot project, also announced that mBridge has reached the stage of minimum product viability, which means moving it to the next stage.
Cryptocurrencies and dollar dominance
Nearly 135 countries and monetary unions, representing 98% of global GDP, are exploring CBDC.
Still, the new technologies they exercise make cross-border motion technically delicate and politically sensitive.
Proponents of CBDC say they will modernize payments by giving them new functions and providing an alternative to regular money, which they believe is on its way out.
But questions remain about why it is considered a development, given that there is almost no demand for it in countries that have already adopted it, such as Nigeria.
There is political and popular opposition to it in some countries, amid fears that it will enable governments to spy on users.
While China dominates the mBridge project, it is also implementing the world’s largest domestic CBDC pilot, which currently involves up to 260 million people and covers 200 possibilities, from e-commerce to government stimulus payments.
Other major emerging economies, such as India, Brazil, and Russia, plan to launch digital currencies within the next year or two.
The European Central Bank has begun work on a pilot program for a digital euro ahead of a potential launch in 2028.
In contrast, the US House of Representatives approved a bill prohibiting the Federal Reserve from creating a digital dollar.
But it must still be approved by the Senate via a vote to become law.
The House of Representatives’ position came against the backdrop of concerns related to privacy, the possibilities offered by digital currencies for government surveillance, and their impact on current financial systems, among other reasons.
This does not mean in any way that a digital dollar will not be issued in the largest economy in the world at any time but rather indicates that the House of Representatives currently does not support the Federal Reserve in its effort to develop the product.
