Saudi Arabia has joined a China-dominated central bank digital currency (CBDC) cross-border trial, potentially reducing the reliance on U.S. dollars in the global oil trade. The Bank for International Settlements (BIS) announced on Wednesday that Saudi’s central bank will become a “full participant” of Project mBridge, a collaboration launched in 2021 between the central banks of China, Hong Kong, Thailand, and the United Arab Emirates.
The BIS, a global central bank umbrella organization overseeing the project, also announced that mBridge had reached the “minimum viable product” stage, allowing it to move beyond the prototype phase. Currently, 135 countries and currency unions, representing 98% of global GDP, are exploring CBDCs. However, the new technologies used in CBDCs make cross-border movement both technically challenging and politically sensitive.
Josh Lipsky, who runs a global CBDC tracker at the U.S.-based Atlantic Council, noted, “The most advanced cross-border CBDC project just added a major G20 economy and the largest oil exporter in the world. This means in the coming year you can expect to see a scaling up of commodity settlement on the platform outside of dollars.”
The mBridge transactions can utilize the code China’s e-yuan is built on. This code is also available to the project’s 26 other “observing members,” which include the New York branch of the Federal Reserve, the International Monetary Fund, and the European Central Bank.
The BIS also reported that the mBridge platform is now compatible with the Ethereum Virtual Machine, a software backbone used by the Ether cryptocurrency. “This allows it to be a testbed,” it said.
Supporters of CBDCs argue they will modernize payments with new functionality and provide an alternative to physical cash. However, questions remain about their advancement, with limited uptake in countries like Nigeria that have already adopted them, and both political and public pushback in some countries amid fears of government surveillance.
In addition to dominating the mBridge project, China is conducting the world’s largest domestic CBDC pilot, which now reaches 260 million people and covers 200 scenarios from e-commerce to government stimulus payments. Other emerging economies, including India, Brazil, and Russia, also plan to launch digital currencies in the next 1-2 years, while the European Central Bank has begun work on a digital euro pilot ahead of a possible launch in 2028.
In contrast, the U.S. House of Representatives passed a bill banning the Federal Reserve from creating a “digital dollar,” although it still needs to pass a vote in the Senate to become law.
