Even though there are no plans to implement central bank digital currencies at this time, the Saudi Arabian Monetary Authority (SAMA) is continuing to examine and analyze potential use cases for such currencies (CBDCs).
The Saudi Arabian Central Bank (previously known as Saudi Arabian Monetary Authority – SAMA) announced on January 23rd, via a press release, that it is conducting trials with a central bank digital currency in collaboration with other financial institutions and fintech firms. The concept is consistent with the actions done by central banks all over the world to produce digital currency that is easily accessible to the general public in order to protect individuals’ privacy and financial stability.
SAMA plans to proceed with its investigation of CBDCs while simultaneously consulting relevant international authorities, local government entities, and the general public. In addition, the Securities and Exchange Commission of Malaysia will proceed with the testing of a CBDC solution as an infrastructure enabler of innovation in financial services. SAMA added that the solution has the potential to contribute to the development of a payment ecosystem that is more robust and to speed up the process of digital transformation in the country’s financial sector.
Gold might serve as collateral for the CBDC
At this time, it is only a matter of speculation, but the Middle East may be thinking about switching away from the US dollar as its primary currency in dealing with international transactions across the world.
The CBDC experiment known as “Project Aber” was successfully carried out by SAMA in 2019. In order to look into the potential advantages of blockchain technology for international payments, the Central Bank of the United Arab Emirates (UAE) formed a partnership.
Recently, Russia and Iran have stated their intentions to work together to develop a digital currency backed by gold. Russia and Iran will be able to link their currencies to the price of gold rather than a fiat currency thanks to a gold-backed stablecoin.
The adoption of stablecoins backed by gold has the potential to threaten the United States dollar’s position as the preeminent currency in the global monetary system. This has led some business professionals to predict that this might indicate a paradigm shift in the economy on a worldwide scale.
The future of CBDCs is still uncertain, but it is likely that more and more countries will adopt them in the coming years. There are several factors driving this trend, including the rise of digital currencies such as Bitcoin and Ethereum, the increasing use of digital technology in financial transactions, and the desire to improve monetary policy, increase financial inclusion, and reduce the risk of fraud and money laundering.
CBDCs are complex and multifaceted, with the potential to have a significant impact on the global financial system and on the way we use money. It will be important to consider both the potential benefits and risks of CBDCs as more countries continue to explore and develop them.
Rickie Sanchez is an article writer specializing in cryptocurrency news. Since late 2017, he has been actively investing in cryptocurrencies. He is enthusiastic about everything that has to do with crypto and he hopes that the readers of his articles in the years to come will gain a massive understanding of blockchain technology.