SAMA Joins BIS mBridge Project for Cross-Border Payments

The Saudi Central Bank (SAMA) has officially joined the Bank for International Settlements’ (BIS) mBridge project as a participant in the Minimum Viable Product (MVP) platform, marking a significant step in the Kingdom’s pursuit of a robust and innovative cross-border payments infrastructure. This move, announced in a news release, positions Saudi Arabia at the forefront of global efforts to modernize international financial settlements using central bank digital currencies (CBDCs).

Context and Background

The mBridge project is a collaborative initiative involving multiple central banks and the BIS to develop a multi-central bank digital currency (multi-wCBDC) system for wholesale cross-border payments. It aims to facilitate faster, cheaper, and more transparent transactions between commercial banks in different jurisdictions. As the first multi-wCBDC platform to reach the MVP phase, mBridge represents a major milestone in the evolution of global payment systems.

SAMA’s participation aligns with its ongoing analysis of policy-related issues to evaluate the feasibility of wholesale CBDC for enhancing cross-border payment and settlement efficiency. This step builds on Saudi Arabia’s leadership in global financial innovation, including its 2020 G20 presidency, during which member economies agreed on a roadmap to improve cross-border payments.

Key Details

According to the official announcement, SAMA joined the mBridge MVP platform to collaborate with international financial institutions and central banks. The platform enables commercial banks to conduct cross-border payments using wholesale CBDCs, potentially reducing reliance on traditional correspondent banking systems. SAMA has been actively investigating wholesale CBDC applications, focusing on policy and technical aspects to ensure seamless integration with existing financial infrastructures.

The G20 roadmap, endorsed under Saudi Arabia’s presidency in October 2020, called for evaluating local CBDC designs and experimenting with their use in settling cross-border payments. SAMA’s involvement in mBridge directly supports these objectives, demonstrating the Kingdom’s commitment to shaping the future of global finance.

Implications and Impact

SAMA’s participation in mBridge could significantly enhance cross-border payment efficiency for Saudi banks and their international partners. By leveraging wholesale CBDCs, transactions may become faster, more cost-effective, and more transparent, benefiting businesses and individuals engaged in international trade and remittances. This aligns with Saudi Arabia’s broader efforts to diversify its economy and strengthen its position as a global financial hub.

Furthermore, the project underscores Saudi Arabia’s proactive role in international financial diplomacy. Collaborating with the BIS and other central banks positions the Kingdom as a key player in setting standards for digital currencies and cross-border payments, which are expected to play a growing role in the global economy.

Vision 2030 Alignment

SAMA’s engagement in the mBridge project reflects the objectives of Saudi Vision 2030, which seeks to transform the Kingdom into a diversified, innovation-driven economy. By embracing cutting-edge financial technologies, Saudi Arabia aims to enhance its economic resilience, foster international cooperation, and contribute to the development of a more inclusive and efficient global financial system. This initiative also supports the Vision’s goal of increasing non-oil revenues and promoting digital transformation across key sectors.

20 Questions

Q1. What is the mBridge project?

A1. The mBridge project is a collaborative initiative led by the Bank for International Settlements (BIS) and several central banks to develop a multi-central bank digital currency platform for wholesale cross-border payments. It aims to make international transactions faster, cheaper, and more transparent.

Q2. Which organization joined the mBridge project as a participant?

A2. The Saudi Central Bank (SAMA) joined the mBridge project as a participant in the Minimum Viable Product (MVP) platform, as announced in an official news release.

Q3. What does MVP stand for in the context of the mBridge project?

A3. MVP stands for Minimum Viable Product, which is the first functional version of the multi-central bank digital currency platform that allows for real-world testing and development.

Q4. What is a wholesale CBDC?

A4. A wholesale CBDC is a digital currency issued by a central bank specifically for use by financial institutions and commercial banks, rather than for general public use. It facilitates large-value interbank payments and settlements.

Q5. Why is SAMA participating in the mBridge project?

A5. SAMA aims to build a robust and innovative cross-border payments infrastructure, evaluate the feasibility of wholesale CBDC, and enhance the efficiency of international payments between commercial banks.

Q6. When did SAMA join the mBridge MVP platform?

A6. SAMA announced its participation in June 2024, according to the official news release from the Saudi Press Agency.

Q7. What is the significance of the mBridge platform reaching MVP phase?

A7. It is the first multi-wCBDC platform to reach the MVP phase, marking a major milestone in the development of cross-border payment systems using central bank digital currencies.

Q8. How does the mBridge project relate to the G20 roadmap?

A8. The G20 roadmap, agreed upon during Saudi Arabia’s 2020 presidency, called for evaluating CBDC designs and experimenting with cross-border payments. SAMA’s participation in mBridge supports these objectives.

Q9. What benefits can mBridge bring to cross-border payments?

A9. It can make cross-border payments cheaper, faster, more inclusive, and more transparent by using wholesale CBDCs, reducing reliance on traditional correspondent banking systems.

Q10. How does SAMA’s participation align with Saudi Vision 2030?

A10. It supports Vision 2030’s goals of economic diversification, digital transformation, and enhancing Saudi Arabia’s role as a global financial hub through innovation and international cooperation.

Q11. What role did Saudi Arabia play in the G20 regarding cross-border payments?

A11. Under Saudi Arabia’s G20 presidency in 2020, member economies agreed on a roadmap to enhance global cross-border payments, emphasizing cheaper, faster, and more transparent transactions.

Q12. Which other institutions are involved in the mBridge project?

A12. The mBridge project involves the Bank for International Settlements (BIS) and several central banks, including SAMA now, collaborating to develop the multi-wCBDC platform.

Q13. What is the primary goal of the mBridge project?

A13. The primary goal is to facilitate cross-border payments between commercial banks in different jurisdictions using a multi-central bank digital currency system, improving efficiency and reducing costs.

Q14. How does SAMA plan to use wholesale CBDC?

A14. SAMA is investigating wholesale CBDC to boost the effectiveness of cross-border payment and settlement between commercial banks, evaluating policy and technical aspects for potential implementation.

Q15. What is the difference between wholesale and retail CBDC?

A15. Wholesale CBDC is designed for financial institutions for large-value transactions, while retail CBDC is intended for general public use in everyday payments.

Q16. What does SAMA’s participation mean for Saudi banks?

A16. It could enable Saudi banks to conduct faster, cheaper, and more transparent cross-border transactions, enhancing their competitiveness and integration into global financial markets.

Q17. How does mBridge enhance financial inclusion?

A17. By making cross-border payments more efficient and cost-effective, mBridge can improve access to international financial services for businesses and individuals, promoting greater financial inclusion.

Q18. What are the next steps for the mBridge project?

A18. The project will continue to develop and test the MVP platform, with participating central banks collaborating to refine the technology and explore real-world applications.

Q19. How does this initiative reflect Saudi Arabia’s leadership in finance?

A19. It demonstrates Saudi Arabia’s proactive approach to adopting innovative financial technologies and shaping global standards, reinforcing its role as a leader in international financial diplomacy.

Q20. What impact could mBridge have on global trade?

A20. By reducing costs and delays in cross-border payments, mBridge could facilitate smoother international trade, benefiting economies worldwide and supporting Saudi Arabia’s trade diversification goals.

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