The Bank for International Settlements (BIS) published a report on a multiple central bank digital currencies (mCBDCs) platform for cross-border payments. The report is a joint effort by the BIS Innovation Hub Hong Kong, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China, and the Central Bank of the United Arab Emirates (CBUAE). BIS and the four central banks developed a prototype of mCBDCs, which shows potential for reducing costs and speeding up cross-border payments. This cooperation is a part of the mBridge project, which shows that joining up national digital currencies in common interoperable platforms offer central banks a technological clean slate.
The common prototype platform for mCBDC settlements was able to operate on a 24-7 basis and complete international transfers and foreign-exchange operations in seconds, as opposed to the several days normally required for any transaction to be completed using the existing network of commercial banks. The cost of such operations to users can be reduced by up to half, according to the report. The mBridge project builds on the initial investigation by the central banks of Hong Kong and Thailand (Project Inthanon-LionRock), which first proved the viability of a common CBDC platform between two jurisdictions, by testing critical features such as transaction privacy, foreign-exchange matching, monitoring, and compliance. The current phase of the project broadens the geographic and diversity of currencies and use cases, adding the Digital Currency Institute's experience with rolling out the e-CNY pilot in China and the learnings by CBUAE from developing a single-currency blockchain solution with Saudi Arabia (Project Aber). The report sets out the takeaways of Project Inthanon-LionRock Phase 2 and introduces the scope of the third phase.
Phase 3 involves further experimentation with design choices and technology trade-offs and a future roadmap from prototype to a production-ready network that can serve the broader central banking community as a public good through open-sourcing. To achieve this, collaboration with the public and private sector will continue and trials will be conducted in a safe environment. Going forward, mBridge will continue to explore existing limitations of the current platform, related to privacy controls, liquidity management, and the scalability and performance of distributed ledger technology in handling large transaction volumes. In addition, the project pipeline will incorporate policy requirements and measures to ensure compliance with jurisdiction-specific regulations, along with testing and investigating appropriate governance models. The project's next phases are expected to include trials in a safe or controlled environment with commercial banks and other market participants. At present, the BIS Innovation Hub is working with ten central banks in different projects that investigate different uses of CBDCs (retail and wholesale), processes, and technologies.
Keywords: International, Asia Pacific, Middle East and Africa, China, Hong Kong, Thailand, Saudi Arabia, Fintech, CBDC, Digital Currencies, Operational Risk, Cross-Border Payments, m-Bridge, Regtech, PBC, BIS
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