China is advancing toward the commercial launch of mBridge, a blockchain-based digital payments network for cross-border settlements involving multiple central banks. The platform aims to drastically reduce transaction times and costs, processing pilot transactions worth $69 billion. This initiative is part of a broader strategy to internationalize China’s digital currency and potentially lessen reliance on the U.S. dollar and traditional banking systems.
Formal preparations for the mBridge commercial rollout are now at an advanced stage. The platform is supported by the central banks of China, Hong Kong, Thailand, the United Arab Emirates, and Saudi Arabia.
The system uses a shared blockchain ledger to connect participating central banks directly. This design allows for the exchange of digital currencies between nations, eliminating intermediaries.
People familiar with the project said foreign exchange transactions that typically take days can now be made within seconds. The transaction fee will also reportedly be just about half of what is usually charged by other payment systems.
The initiative has been launched amidst efforts from the Chinese authorities to increase the international use of the digital yuan. It corresponds to the Chinese authorities’ desire to create new financial routes independent of dollar-based systems.
As stated by Tom Keatinge, founding director of the Centre for Finance and Security at RUSI, the initiative should be considered in the context of the global payment infrastructure race. In his opinion, the Chinese authorities are trying to promote their digital currency via projects like mBridge.
It initially appeared as a collaboration of the Hong Kong Monetary Authority and the Bank of Thailand. In 2021, mBridge became more ambitious due to the participation of the Bank for International Settlements, the People’s Bank of China, and central banks of several Middle Eastern states.
Pilot programs have processed the equivalent of $69 billion, indicating the platform has moved beyond early testing. A Hong Kong-based entity is expected to oversee operations once the system moves into commercial use.
