Saudi Arabia Explores CBDCs Amid Crypto Ban

Saudi Arabia has maintained a cautious stance towards cryptocurrencies, with the Saudi Central Bank (SAMA) and Capital Market Authority (CMA) declaring in 2018 that trading in digital currencies such as Bitcoin is illegal within the country. However, there are signs of a shifting regulatory landscape. The government has shown interest in exploring blockchain technology, central bank digital currencies (CBDCs), and tokenized finance, but only under strict regulatory control. Personal crypto trading is discouraged, yet certain controlled experiments and pilot projects are permitted.

Historically, cryptocurrencies existed in a legal grey area between 2013 and 2017. In August 2018, the government formally prohibited cryptocurrencies due to concerns over fraud and capital flight. Saudi banks began blocking crypto exchange transactions. In 2019, Saudi Arabia partnered with the UAE in the CBDC project known as Project Aber to test cross-border transactions based on blockchain. In 2024, the government appointed Mohsen Al-Zahrani to lead the virtual assets and CBDC initiatives, indicating a growing interest in government-controlled digital currencies rather than decentralized cryptocurrencies.

The regulatory framework in Saudi Arabia involves several key authorities. SAMA is responsible for monetary policy, fintech sandbox initiatives, and CBDC projects. The CMA acts as the securities watchdog and is likely to license any future token offerings. The Permanent Committee on Unauthorized Forex & Virtual Assets is an inter-agency committee that issues public warnings and monitors illegal promotions. There are currently no exchanges, custodians, or ICO platforms with full licenses issued in Saudi Arabia. Sandbox cohorts are given temporary and limited scope licenses by SAMA to test blockchain products with strict limits on the number of users, volumes, and time.

Sandbox members are required to conduct complete customer due diligence, submit Suspicious Transaction Reports, and incorporate Saudi-specific digital-identity systems. Banks are mandated to prevent transfers to offshore crypto sites. There is no specific crypto-tax code since trading is not allowed among retailers. Authorities may seize profits found as proceeds of an unlicensed business. Tokens are not supposed to be sold to the public, and any security-token projects must be approved by the CMA through its sandbox program. Utility tokens can only be used in closed tests and cannot be shared or sold to a wider audience.

All onshore crypto payments are illegal, and no merchant can accept digital assets in exchange for goods or services. The importation of Application-Specific Integrated Circuit (ASIC) rigs and the exchange of mined coins into riyal are in violation of the 2018 decree, and equipment can be impounded at customs. SAMA is currently conducting further internal CBDC testing, including Project Aber and mBridge, and is sponsoring permissioned-ledger-based supply-chain pilots as part of the Vision 2030 initiatives. The lack of a license to operate an exchange may result in fines and imprisonment as applied in AML and Forex regulations.

The Regulatory Sandbox provided by SAMA allows small groups to experiment with new solutions such as remittances, tokenized trade finance, and Sharia-compliant blockchain platforms. These tests are typically 6 to 12 months in length and are limited in users and transactions to maintain control and accumulate data for regulation. Most local start-ups operate their systems outside the country and receive research exemptions during the sandbox. Government-driven experiments focus on interconnecting CBDCs through systems, digital identity wallets, and monitoring oil supply chains using blockchain in a closed-off form.

Regulatory uncertainty, enforcement holes, and the perception of the market pose significant challenges. The prohibition of retail cryptos and the innovation sandbox can mislead foreign investors. Saudi residents often use VPNs to access foreign exchanges, making it difficult to trace AML. Media depictions of cryptocurrencies swing between opportunity and threat, and 2018 warnings continue to send shivers through banks and corporations. The latest development, the 2025 consultation by CMA regarding offshore securities business licenses, suggests future developments in token-fund structures and regulated exchanges. Analysts anticipate a staged legalization in two years, where graduates of the sandbox will be able to acquire conditional exchange licenses, and on-shore KYC and segregated client-asset requirements will be compulsory. Tax guidance is likely to follow.

As a balance between the liberal approach of Bahrain and the ban of Qatar, Saudi Arabia's moderation would establish an intermediary model of conservative markets, balancing capital controls and the expansion of fintech. The ban on the trade of cryptocurrencies in Saudi Arabia remains in place. The nation's development of sandbox initiatives, experiments with a central bank digital currency (CBDC), and negotiations with authorities indicate a potential shift towards a highly regulated method of crypto usage. Developers and investors should be aware of existing laws and penalties and be prepared for changes in policies, as Riyadh aims to promote new technology while maintaining financial stability.