China’s De-Dollarization Push Faces Setback as Saudi Arabia Exits mBridge

· Saudi Arabia has left Project mBridge after completing its proof of concept for the blockchain-based cross-border central bank digital currency (CBDC) platform in May 2025.

· mBridge was launched in 2021 by China, Hong Kong, Thailand, the UAE and the Bank for International Settlements (BIS) to enable direct cross-border payments using digital currencies.

· Saudi Arabia initially joined as an observing member in 2023 and participated in developing a proof of concept in 2024.

· The Saudi central bank said its participation ended as planned after completing the PoC, while an FT source said Riyadh no longer wanted to be publicly associated with the project.

· The BIS also exited mBridge in October 2024, saying it had “graduated out” of the project and denying political considerations.

· Saudi Arabia’s involvement had been significant because the kingdom is central to the petrodollar system, under which oil has traditionally been priced and traded predominantly in U.S. dollars.

· The U.S. dollar remains dominant in global transactions, with the article citing an estimated share of around 90%.

· Concerns over U.S. sanctions following Russia’s invasion of Ukraine have encouraged some countries to reduce dependence on dollar-based financial infrastructure, increase gold holdings and diversify away from U.S. Treasuries.

· Saudi Arabia has explored yuan-denominated oil transactions with China, while Russia and Iran have increasingly used the yuan for transactions affected by U.S. sanctions.

· Beijing is also expanding currency-swap agreements and yuan-based trade settlement with major trading partners as part of its broader effort to internationalize the yuan.

· Despite the Saudi and BIS departures, mBridge continues to develop, including the addition of Macau.

· An Atlantic Council report cited in the article said mBridge transactions had exceeded $55 billion, approximately 2,500 times the 2022 level.

· Key takeaway: Saudi Arabia’s departure represents a setback for the international profile of mBridge, but the project continues to expand. Its potential impact is more likely to be a gradual reduction in dollar dominance rather than an immediate replacement of the dollar in global finance.

China launched mBridge in 2021, enabling central banks to use digital currencies to carry out transactions directly via blockchain technology.

China, Hong Kong, Thailand, the United Arab Emirates and the Bank for International Settlements (BIS), the so-called central bank for global central banks, initially signed up.

Saudi Arabia told the FT that its central bank, also known as SAMA, first joined “mBridge under the umbrella of BIS as an observing member” in 2023 as part of its research into central bank digital currencies, then participated in efforts in 2024 to create a proof of concept.

“As planned, SAMA successfully completed its mBridge [proof of concept] on 13 May 2025. Following the completion of the PoC, SAMA is no longer a participating member of mBridge,” a statement from the central bank said.

A source also told the FT that the Saudi Central Bank no longer wanted to be publicly involved with mBridge. When asked if the kingdom came under U.S. pressure to withdraw, another source said it would be “inaccurate to draw any wider inference.”

That’s after the BIS left mBridge in October 2024 as the U.S. reportedly lobbied it to exit. But the BIS said it had “graduated out” and denied there were any political considerations.  

Saudi Arabia’s initial participation was seen as a major win for mBridge as the oil-producing giant serves as the foundation of today’s “petrodollar” regime that goes back to a deal struck in 1974, when Riyadh agreed to price its oil in dollars and invest surpluses in U.S. assets.

The petrodollar eventually spilled over to other areas of commerce, and the greenback is now used in about 90% of global transactions.

Because oil is a core input to global manufacturing and transport, supply chains have a natural incentive to dollarize. Indeed, Mideast oil and gas is used to make petrochemicals, fertilizer, and even helium, which is critical to chipmaking.

“The world saves in dollars in large part because it pays in dollars,” Deutsche Bank said in note in March. “The dollar’s dominance in cross-border trade is arguably built on the petrodollar: globally traded oil is priced and invoiced in USD.”

Still, the greenback has faced challenges, especially after U.S. sanctions cut off Russia from the dollar-based financial system in response to the Kremlin’s invasion of Ukraine in 2022.

Other countries feared they may one day be targeted with similar sanctions and have been reducing reliance on the dollar-denominated assets. Central banks, for example, have been loading up on gold in recent years while trimming their holdings of U.S. Treasuries.

Saudi Arabia has even flirted with pricing some of its oil sales to China in yuan. Meanwhile, Iran and Russia are using the Chinese currency to get around U.S. sanctions.

The Iran war could put further strain on the dollar. If Iran succeeds in forcing other countries to secure safe passage via the Strait of Hormuz by paying Tehran in yuan, Deutsche Bank warned it could give rise to the “petroyuan.”

“The current conflict may expose further fault lines, by challenging the U.S. security umbrella for Gulf infrastructure and the maritime security for global trade in oil,” analysts added.

Meanwhile, Beijing has extended currency swap agreements with other central banks and promoted yuan-based transactions with top trade partners to further weaken the dollar’s dominance.

And mBridge has been making gains despite the departures of Saudi Arabia and the BIS, while adding Macau as a participant recently.

A report from the Atlantic Council early this year found that transactions on the platform had surged to more than $55 billion, representing a roughly 2,500-fold increase since 2022.

“Project mBridge is unlikely to challenge dollar dominance directly, but it may incrementally erode it,” the Atlantic Council’s Alisha Chhangani told Reuters in January.