RIYADH: The Saudi Central Bank, also known as SAMA, has partnered with international financial institutions and central banks to build an innovative cross-border payments infrastructure.
In a statement issued on Wednesday, SAMA said it has joined the Bank for International Settlements’ mBridge project as a participant in the Minimum Viable Product platform.
The MVP platform is a multi-central bank digital currency system, known as Wholesale CBDC system, that aims to facilitate cross-border payments between commercial banks in different jurisdictions.
It is considered the first multi-wCBDC platform to reach the MVP phase of development.
In October 2020, the G20 during Saudi Arabia's presidency agreed on a roadmap to enhance global cross-border payments, to facilitate cheaper, faster, more inclusive and more transparent payment transactions.
The roadmap called for an evaluation of the proposed local designs for the digital currency of several central banks and experimentation with its use in settling cross-border payments.
SAMA has been investigating the potential of wholesale CBDC, through the analysis of policy-related issues, to evaluate the feasibility of the system to boost the effectiveness of cross-border payment and settlement between commercial banks, the statement said.
According to a BIS statement, project mBridge is the result of extensive collaboration starting in 2021 between the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the UAE, the Digital Currency Institute of the People's Bank of China and the Hong Kong Monetary Authority.
The project aims to tackle some of the key inefficiencies in cross-border payments, including high costs, low speed and operational complexities. It also addresses financial inclusion concerns, particularly in jurisdictions where correspondent banking, which connects countries to the global financial system, has been in retreat, causing additional costs and delays.
Multi-CBDC arrangements that connect different jurisdictions in a single common technical infrastructure offer significant potential to improve the current system and allow cross-border payments to be immediate, cheap and universally accessible with final settlement, the statement said.
