An international payments project called mBridge, which is supported by countries like China, the UAE, Thailand, and Hong Kong, is causing concern in Washington. This project utilizes decentralized ledger technology to enable faster payments that don’t require intermediary banks. Recently, there have been discussions within the Bank for International Settlements (BIS) about the future of their involvement in mBridge, with some officials considering shutting it down.
The project, which is run by the central banks of China, Thailand, the UAE, and Hong Kong, aims to create a cross-border payments system that simplifies and speeds up international money transfers. By eliminating the need for correspondent banks, mBridge allows for direct payments between banks in different countries that do not have established relationships.
Since reaching its minimum viable product stage earlier this year, mBridge has garnered support from various central banks and commercial institutions. The platform supports functions like CBDC issuance and redemption, FX payment versus payment (PVP), CBDC transfers, and more. As of October 2024, the project had 32 observing members and 39 commercial banks participating in its MVP stage.
Advocates of mBridge see it as a potential solution to the challenges faced by traditional banking systems, especially in underserved regions. By enabling countries to settle payments in their own currencies and utilizing distributed ledger technology, mBridge can significantly enhance the efficiency and inclusivity of financial transactions.
However, critics of mBridge are concerned about the geopolitical implications of the project. Some policymakers in the U.S. and Europe have warned against relying on technology developed by China for international financial systems, citing risks related to enforcing economic sanctions and maintaining global influence.
While the BIS has described mBridge as a “public good” that can promote financial inclusion, there are ongoing debates about the project’s broader impact on the global financial landscape. As countries like China advocate for dedollarization and diversification of international payment settlements, projects like mBridge are likely to face scrutiny and regulatory challenges.
Overall, the future of mBridge remains uncertain as stakeholders grapple with the complex interplay between technological innovation, financial stability, and geopolitical considerations. The discussions within the BIS and the broader financial community reflect the evolving nature of cross-border payments and the need for collaborative, forward-thinking solutions in the digital economy.