HomeNewsCBDCCross-Border CBDC Focused Project MBridge Moves Forward

Cross-Border CBDC Focused Project MBridge Moves Forward

Date: 23 June, 2024

For over three years, the Bank for International Settlements (BIS) has collaborated with the central banks of China, Hong Kong, Thailand, and the United Arab Emirates (UAE) on an ambitious cross-border central bank digital currency (CBDC) initiative known as Project mBridge. This project aims to revolutionize cross-border payments by enhancing their efficiency, speed, and transparency.

Traditional correspondent banking, which is the current standard for international transactions, has long been criticized for being slow, expensive, and overly complex. Project mBridge seeks to address these issues through its innovative use of permissioned distributed ledger technology (DLT). The core of this technology, the mBridge ledger (mBL), is designed to facilitate instant peer-to-peer and atomic cross-border payments and foreign exchange (FX) transactions using wholesale CBDCs.

The project recently achieved a significant milestone with the completion of its minimum viable product (MVP) stage. This stage marks a crucial step in the development and testing of the mBridge ledger, demonstrating its potential to streamline cross-border transactions. Adding to this momentum, Saudi Arabia has announced its decision to join the project, signaling growing international interest and confidence in the initiative.

The inclusion of Saudi Arabia, a key player in the global financial landscape, is expected to further bolster the project’s development and adoption. Saudi Arabia’s participation is anticipated to bring additional expertise and resources, helping to refine the mBridge ledger and expand its capabilities. This move underscores the importance of international cooperation in addressing the inefficiencies of current cross-border payment systems.

Project mBridge aims to solve several key problems inherent in traditional correspondent banking. These include lengthy transaction times, high costs, and the complexity of navigating multiple intermediaries and regulatory frameworks. By leveraging DLT, the project promises to significantly reduce transaction times and costs, making cross-border payments faster and more affordable. The technology’s transparency and security features also enhance trust and reduce the risk of fraud.

The mBridge ledger supports instant peer-to-peer transactions, which means that payments can be made directly between parties without the need for intermediaries. This capability is particularly important for cross-border payments, which often involve multiple banks and other intermediaries, each adding their own fees and delays. Atomic transactions, which are also supported by the mBridge ledger, ensure that cross-border payments and FX transactions are executed seamlessly and simultaneously, further reducing the risk of delays and errors.

The successful completion of the MVP stage is a testament to the project’s progress and the potential of its underlying technology. As the project moves into its next phases, further testing and refinement will be essential to ensure that the mBridge ledger can handle the scale and complexity of real-world cross-border transactions. This will involve collaboration with a broader range of stakeholders, including financial institutions, regulatory bodies, and technology providers.

The participation of Saudi Arabia is a significant boost for Project mBridge, highlighting its growing relevance and the international community’s commitment to improving cross-border payment systems. As more countries and central banks express interest in the project, the potential for widespread adoption and implementation of the mBridge ledger increases. This could lead to a new era of more efficient, transparent, and secure cross-border payments, benefiting businesses and consumers worldwide.

Project mBridge represents a bold and innovative effort to transform the landscape of cross-border payments. By addressing the inefficiencies of traditional correspondent banking through advanced DLT, the project aims to create a faster, cheaper, and more transparent system for international transactions. The recent advancements, including the MVP stage completion and Saudi Arabia’s involvement, signal promising progress and a bright future for this groundbreaking initiative. As Project mBridge continues to evolve, it holds the potential to set new standards for cross-border payments and foster greater financial inclusion and cooperation on a global scale.

Key Points:

  • The BIS and central banks of China, Hong Kong, Thailand, and UAE have collaborated on the mBridge CBDC project for over three years.
  • mBridge aims to enhance efficiency, speed, and transparency in cross-border payments.
  • The project addresses the slow, expensive, and complex nature of traditional correspondent banking.
  • mBridge uses a permissioned distributed ledger technology called the mBridge ledger (mBL).
  • mBL supports instant peer-to-peer and atomic cross-border payments and FX transactions using wholesale CBDCs.
  • mBridge recently completed its minimal viable product (MVP) stage.
  • Saudi Arabia has joined the mBridge project.
  • The MVP development included building the mBridge ledger and conducting a successful 2022 pilot with real-value transactions.
  • Founding central banks and monetary authorities have each deployed a validating node.
  • Commercial banks have conducted additional real-value transactions in preparation for the MVP release.
  • A bespoke governance and legal framework, including a rulebook, has been established for the platform’s decentralized nature.
Reference:

https://www.forbes.com/sites/digital-assets/2024/06/23/cross-border-cbdc-focused-project-mbridge-moves-forward/

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