Digital Riyal CBDC Initiative: SAMA's Central Bank Digital Currency Development Program

SAMA’s digital riyal CBDC program represents the Kingdom’s most significant monetary technology initiative, building on the 2019 Project Aber bilateral pilot with the UAE Central Bank. The program has evolved from cross-border wholesale settlement testing — accelerated by Saudi Arabia’s June 2024 entry into the BIS Project mBridge, where $22 million in trial cross-border transactions have been processed alongside central banks from China, Hong Kong, Thailand, and the UAE — to a comprehensive domestic CBDC feasibility study covering both wholesale and retail applications. The mBridge platform has reached Minimum Viable Product (MVP) stage, with its EVM-compatible mBridge Ledger enabling programmable finance capabilities including automated escrow and compliance triggers. Phase 2 pilot testing, scheduled to commence in Q3 2026, will involve 6 Saudi banks and 3 licensed payment service providers testing digital riyal integration with the existing financial infrastructure.

Project Aber: Foundation Phase (2019-2021)

Project Aber, jointly conducted by SAMA and the Central Bank of the UAE (CBUAE), tested a dual-issued digital currency for cross-border settlement between the two central banks. Key findings:

Technical Architecture: The pilot used a distributed ledger technology (DLT) based system built on Hyperledger Fabric, enabling both central banks to operate validator nodes while maintaining independent monetary policy control. The architecture supported simultaneous processing of domestic and cross-border transactions.

Performance Results:

Average cross-border settlement time: 2-5 seconds (compared to 1-2 days for traditional correspondent banking)
Transaction throughput: 200+ transactions per second in test conditions
System availability: 99.97% during the 6-month pilot period
Cost reduction: Estimated 40-60% reduction in cross-border payment processing costs

Key Conclusions:

DLT-based cross-border settlement is technically feasible between GCC central banks
The dual-issuance model preserves monetary sovereignty while enabling interoperability
Privacy-preserving transaction validation is achievable using zero-knowledge proof techniques
Regulatory compliance (AML/CFT) can be embedded at the protocol level

Project Aber’s final report documented 14 specific recommendations for future CBDC development, several of which have been incorporated into the digital riyal domestic program.

Domestic Digital Riyal Program (2022-Present)

Phase 1: Feasibility Study (2022-2025)

SAMA conducted a comprehensive feasibility study examining four digital riyal design models:

Model 1: Wholesale-Only CBDC

Restricted to licensed financial institutions for interbank settlement
Replaces or supplements existing RTGS (SaudiPayments SARIE system)
Lowest implementation complexity, highest compatibility with existing infrastructure
Limited impact on financial inclusion or retail digital payments

Model 2: Retail Direct CBDC

SAMA issues digital riyal directly to individuals and businesses
SAMA manages accounts/wallets and KYC/AML
Maximum financial inclusion potential
Highest implementation complexity; significant impact on banking system deposit base

Model 3: Retail Intermediated CBDC

SAMA issues digital riyal, but distribution and customer management is handled by licensed banks and payment service providers
Preserves the intermediary role of the banking system
Balances innovation with financial stability
SAMA’s current preferred model based on public statements

Model 4: Hybrid CBDC

Combines wholesale and retail intermediated models
Wholesale layer for interbank settlement, retail layer for consumer payments
Highest functionality but most complex governance structure

The feasibility study concluded in Q4 2025 with SAMA announcing its preference for a hybrid model (Model 4), with initial deployment focused on the wholesale layer and phased retail rollout through licensed intermediaries.

Phase 2: Pilot Testing (2026-2027)

Phase 2, scheduled to begin in Q3 2026, will test the digital riyal in controlled conditions:

Wholesale Pilot:

6 Saudi banks testing interbank settlement using digital riyal
Integration with SARIE real-time gross settlement system
Cross-border settlement testing with UAE (building on Project Aber)
Tokenized sukuk settlement using digital riyal (delivery-versus-payment testing)

Retail Pilot:

3 licensed payment service providers distributing digital riyal to test users
10,000 consumer participants in controlled environment
Merchant acceptance testing at 500 points of sale
Integration with SaudiPayments mada debit card infrastructure
Offline payment capability testing

Phase 3: Controlled Launch (2028 target)

Subject to Phase 2 results, SAMA targets a controlled public launch of the digital riyal in 2028, initially alongside existing payment infrastructure rather than replacing it.

Technical Architecture

The digital riyal’s technical architecture, based on SAMA’s published design principles:

Ledger Technology: DLT-based (specific protocol to be determined during Phase 2), with SAMA as the sole issuing authority and central ledger operator. Validator nodes distributed across SAMA and participating financial institutions.

Privacy Design: Transaction-level privacy for retail users (details visible only to SAMA and the intermediary), with full transparency at the wholesale level. Zero-knowledge proof technology under evaluation for privacy-preserving regulatory compliance.

Programmability: Smart contract capability for conditional payments, automated settlement, and integration with tokenized securities delivery-versus-payment. Programmability is a key differentiator versus conventional payment systems, enabling:

Conditional government payments (subsidy disbursements that can only be spent on specified categories)
Automated sukuk coupon payments
Cross-border letter of credit settlement
Supply chain financing automation

Offline Capability: Near-field communication (NFC) based offline payment functionality for retail transactions, ensuring usability in areas with limited internet connectivity.

Interoperability: Designed for interoperability with:

Existing SaudiPayments infrastructure (mada, SADAD, SARIE)
Other GCC CBDC initiatives (UAE, Bahrain)
BIS Project mBridge multi-CBDC platform
Tokenized securities settlement platforms

Impact Assessment

Financial System Impact

SAMA’s impact assessment identifies several potential effects:

Banking System Deposits: Digital riyal retail adoption could divert 5-15% of commercial bank deposits to CBDC holdings, potentially tightening bank funding and affecting lending capacity. SAMA is considering mitigation measures including holding limits (proposed maximum SAR 50,000 per individual) and zero interest on CBDC balances.

Payment System Efficiency: Estimated 30-50% reduction in domestic payment processing costs and near-elimination of settlement risk for interbank transactions. Real-time settlement would replace the current T+0 to T+1 settlement cycle.

Financial Inclusion: Digital riyal could extend financial services to the approximately 8% of Saudi adults who remain unbanked, particularly through offline payment capability and simplified KYC for small-value accounts.

Cross-Border Payments: Building on Project Aber, digital riyal could reduce remittance costs by 50-70% versus current correspondent banking channels. Saudi Arabia processes over SAR 150 billion in outbound remittances annually, making cost reduction economically significant.

Tokenization Ecosystem Impact

The digital riyal has profound implications for Saudi Arabia’s tokenization ecosystem:

Settlement currency: Digital riyal would serve as the native settlement currency for tokenized securities, enabling atomic delivery-versus-payment settlement
Stablecoin displacement: A credible digital riyal could reduce demand for private SAR-denominated stablecoins, affecting the business models of licensed stablecoin issuers
Programmable money: Smart contract integration enables automated financial workflows that support the broader tokenized capital markets infrastructure
Institutional confidence: CBDC availability increases institutional confidence in digital asset markets by providing a risk-free digital settlement medium

International CBDC Coordination

SAMA participates in several international CBDC coordination initiatives:

BIS Project mBridge: Multi-CBDC platform for cross-border payments, alongside the central banks of China, UAE, Thailand, and Hong Kong
IMF CBDC Capacity Development: Technical assistance on CBDC design and implementation
G20 Cross-Border Payments Roadmap: Saudi Arabia’s CBDC development contributes to the G20’s priority of improving cross-border payment efficiency
GCC CBDC Working Group: Regional coordination on CBDC interoperability standards with all six GCC central banks

The digital riyal program positions SAMA at the intersection of monetary innovation and the Kingdom’s broader capital markets transformation, with the potential to become foundational infrastructure for Saudi Arabia’s tokenized financial system.

Digital Riyal and Sharia Compliance

As a central bank-issued liability, the digital riyal carries the same Sharia status as physical SAR banknotes and coins. SAMA has obtained confirmatory opinions from Saudi Arabia’s Council of Senior Scholars affirming that:

The digital riyal is a lawful medium of exchange under Islamic law
Digital riyal does not constitute riba (interest) when held as a non-interest-bearing liability of SAMA
Using digital riyal for tokenized sukuk settlement and Sharia-compliant investment transactions is permissible
Smart contract-based conditional payments using digital riyal are permissible provided the underlying transaction is Sharia-compliant

This Sharia clarity is significant for Saudi Arabia’s Islamic fintech ecosystem, where the digital riyal’s use as settlement currency for tokenized sukuk and other Islamic instruments requires unambiguous Sharia status.

Privacy and Data Protection

The digital riyal’s privacy architecture must balance multiple requirements:

PDPL Compliance: All digital riyal transaction data is subject to Saudi Arabia’s Personal Data Protection Law. Data residency requirements mandate that all digital riyal data — including transaction records, wallet information, and KYC data — remain on Saudi-hosted infrastructure.

Privacy by Design: SAMA’s design principles include “appropriate privacy” — retail transactions should be private from third parties but visible to SAMA for monetary policy and AML/CFT purposes. The zero-knowledge proof technology under evaluation would enable SAMA to verify transaction compliance without accessing individual transaction details unless a specific investigation is triggered.

Tiered Privacy: Different privacy levels based on account/wallet type:

Small-value wallets (below SAR 5,000 balance): Simplified KYC, higher privacy
Standard wallets (SAR 5,000-50,000): Full KYC, transaction-level privacy from third parties
Institutional wallets: Full KYC, full reporting to SAMA

Economic and Monetary Policy Implications

The digital riyal introduces new monetary policy instruments and economic effects:

Monetary Policy Transmission: A digital riyal could improve monetary policy transmission by enabling direct SAMA-to-consumer channels for interest rate changes, stimulus payments, or targeted subsidies. The programmability feature supports conditional government-to-person payments aligned with Vision 2030 social programs.

Deposit Disintermediation: SAMA’s impact assessment estimates 5-15% deposit migration from commercial banks to digital riyal holdings. The proposed SAR 50,000 individual holding limit mitigates this risk while preserving consumer utility. If deposit disintermediation exceeds expectations, SAMA retains the option to reduce holding limits, tier digital riyal interest rates (currently zero), or implement other stabilization measures.

Seigniorage: Digital riyal issuance preserves SAMA’s seigniorage revenue, unlike private stablecoins and payment tokens that generate revenue for private issuers. As digital payment volumes grow and physical cash usage declines, maintaining seigniorage through CBDC becomes an economic consideration.

Financial Stability: A digital riyal provides a risk-free digital asset that serves as a stability anchor during periods of stress in private digital payment instruments. If a stablecoin issuer encounters solvency issues, holders can convert to digital riyal as a safe haven — a feature explicitly designed into the coexistence framework.

Implementation Challenges

SAMA acknowledges several challenges in the digital riyal implementation:

Technology selection: The choice of DLT protocol for the production digital riyal has not been finalized. Phase 2 will test multiple architectures to determine optimal performance under Saudi market conditions
Cybersecurity: A CBDC represents critical national infrastructure — cybersecurity requirements exceed those for any private financial system. SAMA is working with the National Cybersecurity Authority on digital riyal security standards
Offline capability: Achieving reliable offline payments in a digital currency is technically challenging. NFC-based offline transactions require hardware security modules in consumer devices, limiting initial rollout to compatible smartphones
International interoperability: Ensuring the digital riyal interoperates with GCC CBDC initiatives and the BIS mBridge platform requires standardized messaging and settlement protocols that are still under development

Digital Riyal and the Banking System

The relationship between the digital riyal and Saudi Arabia’s 23 commercial banks is a central design consideration:

Intermediary Model: SAMA’s preferred retail intermediated model preserves the banking system’s role as customer-facing distributors. Banks would offer digital riyal wallets alongside conventional deposit accounts, maintaining customer relationships and KYC responsibilities. This model minimizes disruption to the banking system while extending CBDC benefits to end users.

Liquidity Management: Banks participating in the wholesale digital riyal pilot must manage liquidity across both conventional reserves (SARIE settlement) and digital riyal reserves. SAMA is developing liquidity bridge mechanisms that enable instant conversion between conventional and digital central bank reserves, ensuring that digital riyal settlement does not create liquidity fragmentation.

Revenue Impact: Digital riyal could affect bank revenue from payment processing fees (estimated SAR 2-4 billion annually across the banking system). SAMA’s hybrid model — where banks distribute and process digital riyal transactions — preserves some fee revenue through distribution and wallet management services, partially offsetting interchange revenue decline.

Resources

Cross-Border Payment Innovation — Project Aber and mBridge
Payment Token Framework — Private payment tokens
Stablecoin Regulation — SAR stablecoins
Blockchain Settlement Infrastructure — Settlement architecture
Tokenized Sukuk Framework — Sukuk settlement
Open Banking — Distribution infrastructure
Vision 2030 Financial Sector — Strategic context
GCC Cooperation — Regional CBDC coordination

For digital riyal program inquiries: info@sauditokenisation.com

SAMACBDCdigital riyalProject Aberdigital currency