Saudi Arabia Withdraws from mBridge Digital Currency Platform

Saudi Arabia Withdraws from mBridge Digital Currency Platform

Why in News?

• Saudi Arabia has withdrawn from Project mBridge, a cross-border payment platform that uses central bank digital currencies (CBDCs).
• The Saudi Central Bank (SAMA) confirmed that it completed its proof-of-concept phase on 13 May 2025 and subsequently stopped participating in the project.
• SAMA stated that the withdrawal was part of its original plan and should not necessarily be interpreted as a response to US pressure.

About mBridge?

• mBridge is a project designed to facilitate direct cross-border payments using digital currencies issued by central banks.
• It was developed through cooperation among the BIS Innovation Hub, China, Hong Kong, Thailand and the UAE, with Saudi Arabia joining the project in 2024.
• The platform uses distributed ledger technology to enable faster settlement of cross-border payments.
• Its objective is to reduce the cost, time and complexity involved in international payments.
• Direct transactions between participating currencies could also reduce the need to use the US dollar as an intermediary currency.

Significance

• The project has attracted attention because it could provide an alternative mechanism for international payments outside traditional dollar-based systems.
• This has contributed to wider discussions on de-dollarisation and the future of the international monetary system.
• However, Saudi Arabia's exit does not mean that it has abandoned research on wholesale CBDCs.
• The BIS announced in October 2024 that it had handed the mBridge project over to its participating partners, describing its role as completed.
• The development highlights the growing importance of CBDCs and digital payment infrastructure in international finance.

About Central Bank Digital Currency (CBDC):

• A CBDC is the digital form of a country's official currency issued by its central bank.
• Retail CBDC: Used by individuals and businesses for everyday payments.
• Wholesale CBDC: Used mainly by banks and financial institutions for large-value payments and settlements.

Practice Question 

Q. Consider the following statements regarding Project mBridge:

1. Project mBridge enables cross-border payments through digital currencies issued by central banks. 
2. Saudi Arabia joined Project mBridge as a participant in its minimum viable product phase in 2024. 
3. The BIS continues to lead and operate Project mBridge after October 2024. 
4. The use of mBridge could reduce the need for the US dollar as an intermediary currency in certain cross-border transactions. 

Which of the statements given above are correct?

(a) 1 and 2 only
 (b) 1, 2 and 4 only
 (c) 2, 3 and 4 only
 (d) 1, 2, 3 and 4

Answer: (b) 1, 2 and 4 only

Explanation:

• Project mBridge is designed to facilitate cross-border payments using central bank digital currencies (CBDCs). Hence, Statement 1 is Correct. 
• Saudi Arabia joined the project in 2024 during its minimum viable product phase. Hence, Statement 2 is Correct. 
• The BIS handed the project over to its participating partners in October 2024 and described its role as completed. Hence, Statement 3 is Incorrect. 
• Direct transactions between participating currencies through mBridge could reduce the need for the US dollar as an intermediary currency. Hence, Statement 4 is Correct.