NEWS AFFAIRS 7 : WHERE EVERY STORY HAS IT'S AFFAIR!
Last updated on August 26th, 2024 at 10:59 pm
Table of Contents
Introduction to Project mBridge
Project mBridge is a groundbreaking initiative that aims to revolutionise cross-border payments through the development of a shared multi-central bank digital currency (CBDC) platform. Utilising distributed ledger technology (DLT), this project is designed to facilitate instant, low-cost cross-border payments and settlements, addressing some of the most significant inefficiencies in the current global financial system.
Origins and Collaboration
The project began in 2021 as a collaboration between several prominent financial institutions, including the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People’s Bank of China, and the Hong Kong Monetary Authority. Recently, the Saudi Central Bank has joined as a full participant, bringing the total number of active members to five. Additionally, there are now over 26 observing members, which include central banks and financial institutions from around the world.
Goals and Objectives
Project mBridge aims to tackle several key issues in cross-border payments:
- High Costs: Traditional cross-border payments are often expensive due to various fees and intermediaries involved.
- Slow Speed: The current system can take several days to process international transactions.
- Operational Complexities: There are numerous regulatory and operational hurdles that complicate cross-border payments.
- Financial Inclusion: In some regions, the decline of correspondent banking services has led to increased costs and delays, which Project mBridge aims to mitigate.
By creating a multi-CBDC platform, Project mBridge seeks to make cross-border payments immediate, inexpensive, and universally accessible, with final settlement guaranteed.
A central bank digital currency (CBDC; also called digital fiat currency[1] or digital base money[2]) is a digital currency issued by a central bank,[3] rather than by a commercial bank.
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The mBridge Ledger
The platform is built on a new blockchain called the mBridge Ledger, which supports real-time, peer-to-peer cross-border payments and foreign exchange transactions. This blockchain technology enables transactions to be processed directly between parties, reducing the need for intermediaries and thus lowering costs and increasing speed.
Pilot and MVP Stage
In 2022, the project team conducted a pilot with real-value transactions to test the capabilities of the mBridge Ledger. Following the successful pilot, the team worked to evolve the prototype into a Minimum Viable Product (MVP), which has now been achieved. This MVP stage means the platform is ready for real-world use, subject to jurisdictional approvals.
Governance and Legal Framework
To support the decentralized nature of the platform, the project steering committee has created a bespoke governance and legal framework, including a detailed rulebook. This framework ensures that the platform operates smoothly and within legal boundaries across different jurisdictions.
Invitation for Innovation
With the MVP stage reached, Project mBridge is now inviting private sector firms to propose new solutions and use cases. This call for innovation aims to further develop the platform and explore its full potential. Interested firms can apply to participate through the provided participation form.
Observing Members
As of June 2024, the observing members of Project mBridge include a diverse range of central banks and financial institutions from around the globe.
These members are: Asian Infrastructure Investment Bank, Bangko Sentral ng Pilipinas, Bank Indonesia, Bank of France, Bank of Israel, Bank of Italy, Bank of Korea, Bank of Namibia, Central Bank of Bahrain, Central Bank of Chile, Central Bank of Egypt, Central Bank of Jordan, Central Bank of Malaysia, Central Bank of Nepal, Central Bank of Norway, Central Bank of the Republic of Türkiye, European Central Bank, International Monetary Fund, Magyar Nemzeti Bank, National Bank of Cambodia, National Bank of Georgia, National Bank of Kazakhstan, New York Innovation Centre at the Federal Reserve Bank of New York, Reserve Bank of Australia, South African Reserve Bank, and the World Bank.
Conclusion
Project mBridge represents a significant step forward in improving the global financial system. By enabling instant, low-cost cross-border payments through a multi-CBDC platform, it has the potential to transform how international transactions are conducted. The ongoing collaboration among major financial institutions and the invitation for private sector innovation signal a promising future for global financial connectivity.
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