Earlier this week the UAE’s RAKBANK confirmed it made its first cross border payment using the mBridge platform. mBridge is multi-wholesale CBDC payment solution founded by the BIS Innovation Hub and the central banks of Thailand, Hong Kong, China and the UAE, with Saudi Arabia joining in June. In the same month, the central banks launched the minimum viable product (MVP) version of mBridge.
A key advantage is transactions can be sent directly from the sending bank to the recipient bank without the need to rely on correspondent banks as intermediaries. Hence, it aims to make payments faster, cheaper and more transparent.
“The successful transfer of eCNY to our correspondent in China is a game-changer in several respects,” said Vikas Suri, Co-Head of Wholesale Banking Group at RAKBANK. “It’s one of the first UAE-led foreign currency transfers executed in local currencies without involving a third currency to China and without using conventional payment rails. This is a gamechanger that paves the way for instant blockchain based CBDC exchanges with payment versus payment, fundamentally altering how we approach international payments.”
A typical transaction would start with the bank buying wholesale CBDC dirhams. On the mBridge platform, the wholesale dirhams are exchanged for eCNY, and the eCNY is transferred to the recipient bank. The peer-to-peer nature of the transaction removes the need to hold Nostro balances offshore or to make any additional interbank payments.
The technology for the mBridge platform was developed by the Chinese central bank’s Digital Currency Research Institute, using a bespoke consensus mechanism, but borrowing some elements from Ethereum.
Last year the UAE started working with enterprise blockchain firm R3 for wholesale and retail CBDC. R3 said its Corda-based issuance layer technology was used for the mBridge payment, which would require some integration between Corda and the mBridge platform. We’ve requested details but didn’t receive a response in time for publication.
Chinese banks promote mBridge involvement
Meanwhile, various Chinese banks and Tencent promoted their involvement in mBridge payments in June, following the launch of the minimum viable product (MVP). In July, the Agricultural Bank of China said it successfully handled its first live mBridge transaction for a manufacturer. And last month, ICBC said it received eCNY via mBridge for one of its clients in Liuzhou.
The fact that mBridge transactions are still newsworthy means there’s a slowly, slowly approach as one might expect at the MVP stage.
