RIYADH: The Saudi Central Bank, also known as SAMA, is carrying out experiments with a central bank digital currency in cooperation with other financial institutions and fintech firms, the Saudi Press Agency reported.
The project is in line with measures taken by central banks around the world to issue widely accessible digital coins to ensure privacy and financial security.
Central banks started mulling this transition following a rise in the popularity of cryptocurrencies but with a legal cover to curb criminal use of the otherwise unregulated digital currencies.
SAMA is currently studying the economic impact, market readiness, and potentially effective and swift applications for payment solutions using digital currency, the SPA report added.
The central bank is also seeking to explore policy issues as well as legal and regulatory aspects prior to moving to the next stages of the project.
Local banks and payment companies are an indispensable cornerstone of this project and its implementation, according to SAMA Gov. Fahd bin Abdullah Al-Mubarak.
It is crucial to involve banks and local fintech firms in the current phase of the project, he noted.
He said it is also important to ensure the participation of other market players and third-party advisory and technical service providers to better understand the functions of digital currency and test various design options.
The central bank will continue this phase of the project while consulting, at the same time, with relevant international agencies, local government agencies, and the public, the top official added.
SAMA and the Central Bank of the UAE are also working on a project called “Aber,” which seeks to evaluate the feasibility of issuing a digital currency for use between the two central banks.
The aim is to develop a cross-border payment system that will reduce transfer times and costs between banks in the two Gulf states.
The banks plan to develop a technology, such as distributed ledgers, which can be used to manage digital currencies between the two central banks and banks participating in the initiative in Saudi Arabia and the UAE.