A report by the Monetary Authority of the Kingdom of Saudi Arabia (SAMA) highlights the benefits of implementing Ripple’s payment solutions. The report shows that SAMA has been using the technical infrastructure of RippleNet (formerly xCurrent) since 2018. As a result of the implementation, SAMA expects savings of approximately $400 billion annually.
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Saudi Arabia’s goal, according to the report, is to achieve the “cashless society” by 2030. In that sense, Ripple’s payment solutions have allowed SAMA to increase transparency, reduce costs and provide the country with fast, cross-border payments. In addition, the report states that the implementation of Ripple’s solution and the adoption of new payment systems have had a positive impact on small and medium-sized businesses.
However, SAMA has adopted Ripple’s payment protocol without using the underlying currency, XRP. Instead, it opted to use the foreign remittance technology, a “design choice that presumably makes the system more familiar bit inhibits the transformative potential of Ripple’s product”, as the report states. According to SAMA, financial services have become more accessible since the adoption of innovative payment systems such as Ripple:
SAMA plans to provide with thorough training on programme management. This will help boost non-cash transactions, a long standing goal of the Saudi central bank. Adoption of these technologies has been accompanied by the development of a vibrant domestic market for fintech startups. […]
SAMA is leading the charge as the first central bank to provide resources to domestic banks that want to enable instant payments using Ripple’s innovative blockchain solution.
In a more recent report, SAMA reviewed the role of the blockchain technology in the banking sector. The report reviews the most important challenges still facing the adoption of the blockchain technology and distributed ledger technology. The report states the following:
Regulatory approaches to blockchain in financial services are incomplete, and significant upgrades are required, both at global and domestic level. Blockchain and DLT are providing the impetus for a broad array of economic activities to shift from centralised to de-centralised market structures. However, while different applications might make use of similar underlying technologies, the precise regulation and legal risks that blockchain and DLT might encounter vary depending on the nature of the use cases.
SAMA recognizes that there is an increase in digital payments around the world. The financial institution states that in China alone the mobile payments market is worth $5.7 trillion annually and is dominated by Alipay and WeChat Pay. At the same time, the report concludes, according to survey results, that banks still have a central role as issuers of currency and that there is still distrust in cryptocurrencies:
(…) respondents indicated that they would feel most confident in digital money issued by the domestic monetary authority. Respondents globally expressed a lack of confidence in digital money issued by a tech company (…) particularly respondents from advanced economies.
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