BIS, Central Banks, Complete Latest CBDC Experiment
Posted by Colin Lambert. Last updated: October 26, 2022
The Bank for International Settlements (BIS) and four central banks have completed a successful pilot of the use of central bank digital currencies (CBDCs) by commercial banks for real-value transactions across borders, as part of Project mBridge.
The BIS Innovation Hub Hong Kong Centre joined forces with 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. The project saw 20 banks in the four jurisdictions used the mBridge platform to conduct 164 payment and FX transactions totalling over $22 million over six weeks, settled directly on the platform.
Project mBridge envisions an efficient, low-cost, regulatory-compliant and scalable cross-border payment solution with CBDC at its core. The experiment was designed to operate across different jurisdictions and currencies, to explore the capabilities of distributed ledger technology and the application of CBDC in cross-border payments between commercial banks.
The project is part of the ongoing efforts to experiment with new technologies to deliver faster, cheaper and safer cross-border payments and settlements, a priority identified by the G20. The BIS says many jurisdictions, in particular emerging and developing economies, are losing access to the international network of correspondent banking services, leaving many households and firms without sufficient or affordable access to the global financial system for payments.
By enabling peer-to-peer and instant exchange of multiple CBDCs on a single network, Project mBridge aims to solve long-standing inefficiencies in cross-border payments and foster greater financial inclusion and innovation in international payments, it adds.
“Financial exclusion is not just a problem for individuals; it is also affecting economies,” says Cecilia Skingsley, head of the BIS Innovation Hub. “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.”
The BIS says it will continue to work on this and similar projects to explore the user requirements, technical specifications, and governance framework needed for interoperable CBDCs. It adds the mBridge project team will continue building the technology and testing it with a view to producing a product with enough features to be used by early adopters in the year ahead and a production-ready system thereafter.
