Updated on January 9, 2023 12:50 PM
As part of Project mBridge, the Bank for International Settlements (BIS) and four central banks have successfully concluded a pilot study on using central bank digital currencies (CBDCs) by commercial banks for cross-border real-value transactions.
The Hong Kong Monetary Authority, the Bank of Thailand, the People's Bank of China's Digital Currency Institute, and the Central Bank of the United Arab Emirates joined forces with the BIS Innovation Hub Hong Kong Center. Twenty banks in the four countries used the mBridge platform to carry out 164 payment and foreign exchange transactions worth more than $22 million over six weeks, as described in a recent report. These transactions were resolved directly on the platform.
According to a study by the BIS published on Wednesday, various central bank digital currencies (CBDC) were issued on the platform for a total of USD 12 million.
Blockchain technology, which is most frequently connected to cryptocurrencies like Bitcoin, is being used by governments worldwide to create CBDCs, digital versions of their fiat currencies. The principal objective is to increase the efficiency of payments while avoiding the volatility of cryptocurrencies.
Twenty commercial banks, including HSBC, Bank of China, Bangkok Bank, and First Abu Dhabi Bank, coordinated 164 successful payment transactions and foreign exchanges totaling USD 22 million on behalf of corporate clients over six weeks in August and September using CBDCs issued on mBridge.
"By providing a shared platform on which participants conducted peer-to-peer payments directly in the safety of central bank money across multiple jurisdictions, the pilot successfully demonstrated the platform's ability to improve cross-border payment speed and efficiency and to reduce settlement risks in a real-world setting," BIS stated in the report.
Project mBridge aims to create an effective, affordable, legal, scalable, and cross-border payment solution with CBDC at its foundation. The experiment's goal was to test the potential of distributed ledger technology and the use of CBDC in cross-border payments between commercial banks while operating across multiple legal and monetary systems.
The G20 has deemed it a priority to experiment with innovative technologies to enable faster, less expensive, and safer cross-border payments and settlements. Many jurisdictions are losing access to the Internet, particularly those in rising and developing economies.
Project mBridge intends to address long-standing inefficiencies in cross-border payments and promote greater financial inclusion and innovation in global payments by enabling peer-to-peer and instant interchange of numerous CBDCs on a single network.
"This project makes important strides towards developing a platform that has the potential to foster more inclusive and efficient payments systems that will benefit those making and receiving payments in different currencies and jurisdictions as well as the overall functioning of the global financial system." 一 Cecilia Skingsley, the director of the BIS Innovation Hub, explains.
Through work on this and related initiatives, the BIS will continue to investigate the user requirements, technical requirements, and governance structure required for interoperable CBDCs. The mBridge project team will keep developing and testing the technology to create a system with enough features to be used by early adopters in the coming year and a production-ready system.