Saudi Arabia Studying Blockchain And DLT, But Will Not Eliminate Fiat Currency

No Plans to Cancel Physical Cash

Speaking in an interview with local news outlet Al-Eqtisadiah, a representative of SAMA noted the growing importance of central bank digital currencies (CBDC) globally. According to the spokesperson, many apex banks are still in the early stages of their CBDC projects, as they are either researching, experimenting, or are at the proof-of-concept stage.

The SAMA representative also said that most CBDC projects leverage blockchain technology, because of the characteristics and benefits associated with blockchain. CBDC is a digital version of a country’s fiat currency, which is usually issued and controlled by the central bank.

Financial institutions believe that CBDCs can make transfer and settlement times faster, more efficient, and less expensive. Also, the centralized nature of sovereign digital currencies enable central banks to maintain control over the payment system.

Meanwhile, Saudi Arabia was one of the earliest countries to explore a CBDC. Back in January 2019, the country’s central bank announced the launch of a digital currency project called “Aber”, in collaboration with the United Arab Emirates’ UAE apex bank. One of the aims of the pilot project was to explore the use of digital currency for cross-border settlement, with the project using distributed ledger technology (DLT).

While Saudi Arabia is working towards increasing electronic payments operations to 70% by 2025, as against 2030 planned earlier, SAMA is not planning to eliminate physical cash. According to the central bank spokesperson, the bank is looking to make cash and digital payments coexist, in order to enable citizens to complete transactions with their preferred alternative.

Nigeria’s Central Bank Launches eNaira

The Central Bank of Nigeria (CBN), meanwhile, has become the first central bank in Africa to launch its CBDC project. The eNaira was unveiled on Monday (October 25, 2021), by Nigeria’ President, Muhammad Buhari, at the State House, Abuja.

Meanwhile, the eNaira website went live in late September, with initial plans to launch the CBDC on October 1. The website is available for download on the Google Play store and App store.

According to Osita Nwanisobi, the CBN’s Director of Corporate Communications, the launch of the eNaira project resulted from years of research carried out by the Central bank, which was exploring ways to make financial transactions “easier and seamless.”

Nwanisobi further said:

“Given that the eNaira is a journey, the unveiling marks the first step in that journey, which will continue with a series of further modifications, capabilities, and enhancements to the platforms. The CBN will continue to work with relevant partners to ensure a seamless process that will benefit every user, particularly those in the rural areas and the unbanked population.”

Meanwhile, other central banks in Africa are also working on their CBDC projects. In August, the Bank of Ghana partnered with German company Giesecke+Devrient(G+D) for a retail CBDc pilot, with G+D providing technology solution for the trial.

The South African Reserve Bank (SARB) earlier announced plans to carry out a feasibility study for a retail CBDC.

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