Central Bank Digital Currencies, A Potential Game Changer for the Middle East?

Central Bank Digital Currencies, A Potential Game Changer for the Middle East?

May 13 Tech Standard

Central banks in the Middle East are exploring Central Bank Digital Currencies (CBDCs) as a way to revolutionize cross-border payments and enhance monetary policy tools. Two leading figures, Yazeed Al-Nafjan, deputy governor of Saudi Arabia's SAMA, and Khalid Humaidan, governor of the Bahraini central bank, recently discussed the potential of CBDCs at a World Economic Forum event.

Al-Nafjan favors a wholesale CBDC, targeting financial institutions, given Saudi Arabia's already high digital payment adoption rate. He sees CBDCs as a way to reduce costs, improve efficiency, and increase transparency in cross-border transactions. SAMA is actively involved in the mBridge project, a collaborative CBDC initiative by several Asian countries.

Humaidan, on the other hand, emphasizes the importance of CBDCs for facilitating cross-border transfers in economies with large expatriate populations. He believes the Middle East's existing digital payment infrastructure makes CBDC adoption smoother. He also suggests using an interest-bearing CBDC as a tool for central banks to directly influence consumer interest rates.

While both officials acknowledge the potential benefits of CBDCs, they caution against rushing implementation. Al-Nafjan stresses the need for a coordinated approach, considering potential economic risks. Humaidan highlights the lack of trust observed in some early adopters and suggests a gradual transition.

The Middle East's exploration of CBDCs is a promising development for the region's financial landscape. Whether wholesale or retail, interest-bearing or not, CBDCs could significantly improve cross-border payments and empower central banks. However, careful planning and collaboration are crucial for a successful implementation


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