mBridge, the wholesale platform for cross border central bank digital currency (CBDC) payments, is set to launch soon, according to Eddie Yue, the CEO of the Hong Kong Monetary Authority (HKMA). Along with China, Thailand, and the UAE, the HKMA is one of the four participant central banks. The launch is described as a minimum viable product that will pave the way for the gradual commercialization of mBridge.
Last year, when the central banks and the Bank for International Settlement (BIS) shared the results of the last pilot, several additional central banks had observer status. The findings of the pilot showed that mBridge enables faster, cheaper, and more transparent payments. It is possible that the small group of participant central banks was chosen to expedite the platform’s production, as large consortia tend to be slower in decision-making.
The observer central banks included the Philippines, Malaysia, Indonesia, Korea, Sweden, and Israel. Additionally, staff from the London BIS Innovation Hub and the Federal Reserve Bank of New York were present as observers.
Speaking at China’s Bund conference, Mr. Yue discussed the declining support for globalization and the shift towards protectionism and cross-border restrictions. He noted that China’s role in regional supply chains will become even more significant. As trade and supply chain linkages in Asia become more integrated, there is a greater opportunity to use local currencies in regional trade settlement, including Chinese trade settled in RMB.
It remains to be seen whether these developments will impact the dominance of the U.S. dollar. Currently, SWIFT is the dominant infrastructure in cross border payments. However, the launch of mBridge, if successful, could be a significant step towards the fragmentation of global payments. The use of CBDCs in cross border transactions can potentially reduce reliance on traditional settlement systems and currencies.
As mBridge prepares for its launch, the industry will closely monitor its progress and assess its potential impact on the global payments landscape. Cross border CBDC payments have the potential to revolutionize international transactions, making them faster, cheaper, and more transparent. Whether mBridge gains traction and leads to the fragmentation of global payments remains to be seen, but it certainly has the potential to shake up the financial world.