LONDON/HONG KONG – Saudi Arabia has joined the Hong Kong Monetary Authority’s Project mBridge – a cross-border platform to improve international trade settlement – in what could be another step towards less of the world's oil trade being done in US dollars.

The move, announced by the Bank for International Settlements on Wednesday, will see the Saudi central bank become a "full participant" of the project, a collaboration launched in 2021 between the central banks of China, Thailand and the United Arab Emirates and the HKMA.

The BIS, a global central bank umbrella organization which oversees the project, also announced that mBridge had reached "minimum viable product" stage, meaning it will move beyond the pro type phase.

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“Given its high compatibility, the mBridge MVP platform could serve as a testbed for add-on technology solutions, new use cases and interoperability with other platforms,” the HKMA said in a news release, inviting private sector firms to propose solutions and use cases by completing the participation form prepared by the BIS Innovation Hub.

Roughly 135 countries and currency unions, representing 98 percent of global GDP, are exploring central bank digital currencies, or CBDCs. But the new technologies they use makes cross-border movement both technically challenging and politically sensitive.

With the collaborative efforts of the central banking community and the private sector, the cross-border payment landscape is undergoing significant development.

Eddie Yue, Chief Executive, HKMA

"The most advanced cross-border CBDC project just added a major G20 economy and the largest oil exporter in the world," said Josh Lipsky, who runs a global CBDC tracker, opens new tab at the US-based Atlantic Council.

"This means in the coming year you can expect to see a scaling up of commodity settlement on the platform outside of dollars – something that was already underway between China and Saudi Arabia but now has new technology behind it."

The mBridge transactions can use the code China's e-yuan is built on. That code is also available to the project's 26 other "observing members" that include the likes of the New York branch of the Federal Reserve, the International Monetary Fund and European Central Bank.

The BIS also said the mBridge platform was now compatible with the Ethereum Virtual Machine – a piece of software that forms the backbone of the network used by the Ether cryptocurrency.

"This allows it to be a testbed," it said.

Supporters of CBDCs say they will modernize payments with new functionality and provide an alternative to physical cash, which seems in terminal decline.

“With the collaborative efforts of the central banking community and the private sector, the cross-border payment landscape is undergoing significant development,” Eddie Yue Wai-man, chief executive of the HKMA, said inviting other central bank peers to join the mBridge journey.

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China is also carrying out 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 big emerging economies, including India, Brazil and Russia, also plan to launch digital currencies in the next 1-2 years while the ECB has begun work on a digital euro pilot ahead of a possible launch in 2028.

In stark contrast, the US 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.