Population: 35 million

Wealth in domestic bank deposits: 656 billion USD (December 2023)

Offshore expatriated wealth: 128.8 billion USD

Main offshore banking locations: N/A

Number of individual brokerage accounts: 5.68 million (2022)

Crypto adoption (% of population): 3 million (14%)

TLDR

Saudi Arabia has a relatively open economy with minimal exchange controls. The currency is pegged to the US dollar. While cryptocurrency adoption is substantial despite an official ban, the government is cautiously exploring digital asset regulation and a central bank digital currency. Foreign access to Saudi securities is increasing through qualified investor programs, though unauthorized marketing of securities remains prohibited. Overall, Saudi Arabia offers a vibrant, petrodollar-fueled economy and a young, tech-savvy population, but regulatory uncertainty persists for cryptocurrencies and foreign financial firms.

Exchange controls

Saudi Arabia imposes minimal exchange controls. There are no foreign exchange restrictions on cross-border capital flows and transactions involving the Saudi Riyal, whether conducted by residents or non-residents, with the sole exception of exchanges with Israel. The Riyal is officially pegged to the IMF’s Special Drawing Rights basket, but in practice it has a fixed exchange rate of 3.75 Riyals to 1 US Dollar. This long-standing dollar peg contributes to relative monetary stability. Residents and foreign investors face no barriers to buying, holding, selling or transferring gold bullion and specie within the country or across borders, as long as the gold is 14 karats or higher. Overall, Saudi Arabia has one of the most open foreign exchange regimes in the Gulf region.

Distribution rules for foreign investment products

Saudi Arabia strictly regulates the marketing and sale of securities within its jurisdiction. Foreign firms that engage with Saudi-based clients or counterparties are generally subject to domestic licensing laws. The Saudi Central Bank (SAMA) prohibits the unauthorized promotion of banking and investment products in Saudi territory, although certain exemptions apply. For instance, the Capital Market Authority (CMA) allows foreign entities to undertake securities activities with government bodies or via reverse inquiry without needing authorization. While enforcing local laws, regulators also recognize that complete restriction would hinder constructive foreign participation in the financial system. Hence, the licensing framework balances attracting foreign investment with appropriate regulation.

Qualified investors

Saudi Arabia has implemented reforms to allow approved foreign investors to participate directly in its capital markets. The Qualified Foreign Investor (QFI) framework launched in 2015 permits overseas financial institutions to invest in Saudi equities and bonds listed on the Tadawul stock exchange. The QFI system aims to attract foreign capital and provide exposure to Saudi Arabia’s petrodollar-fueled economy. Applicants must meet criteria related to assets under management, operating history, and regulatory compliance in their home jurisdictions. Banks, brokerages, fund managers, pension funds, endowments, and sovereign wealth funds can potentially obtain QFI status.

The QFI registration procedure through authorized local intermediaries takes only five business days. Once qualified, these foreign investors can invest freely in all listed securities including equities, bonds, funds, and IPOs. But individual ownership is capped at 10% in any single stock, and aggregate foreign ownership cannot top 49% for a listed company. QFIs must also comply with reporting requirements and trading regulations. Besides the QFI regime, foreign investors can also access the Saudi market through swap agreements with local intermediaries or direct investment into specialized segments like the parallel equity market and debt market. While restrictive ownership limits apply, the QFI framework demonstrates Saudi Arabia’s focus on prudently opening its capital markets to overseas investors.

Cryptocurrency regulation

Saudi Arabia has maintained a cautious stance on cryptocurrencies, though this appears to be slowly evolving. In 2018, the Saudi Central Bank (SAMA) officially discouraged virtual currency trading, citing market risks, volatility, and the lack of government oversight. However, cryptocurrency adoption has grown substantially since then. Surveys indicate that around 17% of Saudi adults, equivalent to 3-4 million people, now own cryptocurrencies even without a formal regulatory framework. These crypto investors operate in a legal gray zone, as trading is banned but penalties are unclear. Religious objections have also been raised by Islamic scholars, arguing that cryptocurrencies could enable illegal activities and resemble gambling.

On the other hand, SAMA and other government bodies have shown increasing interest in the possibilities of blockchain technology and digital tokens. In 2019, SAMA joined a digital currency project by the United Arab Emirates central bank. More recently, SAMA launched its own central bank digital currency initiative and appointed a head of its virtual assets division. SAMA is also collaborating with relevant authorities to develop digital asset regulations, though concrete measures are still pending. While not fully embraced yet, cryptocurrencies appear to be gaining regulatory acceptance, aided by proactive official experiments with blockchain applications. The government has additionally established a digital assets exchange platform. But for the foreseeable future, uncertainty around the legal status of cryptocurrencies is likely to persist.