Today it was announced that the mBridge cross border central bank digital currency (CBDC) project has entered the minimum viable product (MVP) stage, the earliest production phase. mBridge is an initiative between the Bank for International Settlements (BIS) Innovation Hub and the central banks of China, Hong Kong, Thailand and the UAE. Additionally, the Central Bank of Saudi Arabia has become the fifth central bank member, with another 26 observers.
The initiative uses tokenized wholesale CBDCs for each currency, enabling atomic cross border settlement. As a potential alternative to the Swift payment messaging system, mBrige supports faster cross-border payments, which are hopefully cheaper.
With the launch of the MVP stage, the members are looking to add new technologies and use cases, including making it interoperable with other platforms. Hence the BIS is inviting participation from private sector firms.
mBridge uses an Ethereum compatible DLT network, the mBridge Ledger, developed by China’s Digital Currency Research Institute (DCRI). With the start of the MVP phase, all participant central banks have a functioning node on the network. The solution has evolved since its 2022 pilot, not least by developing a governance model and legal framework, including an operational rulebook.
The DCRI previously said that mBridge payments take seven seconds, and it halves their cost. One important feature is mBridge doesn’t support US dollar payments, and USD is frequently used in trade and as an intermediate currency for foreign exchange (FX). Hence, a critical factor in mBridge’s success will be its ability to provide competitive exchange rates and FX liquidity. Given that the BIS could be inundated with private sector applications, we suspect proposals that address this might stand a better chance of being included.
