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Project mBridge e-currency project involving Hong Kong, mainland China hits landmark

South China Morning Post
·3-min read

A multi-country central bank digital currency (CBDC) project involving mainland China, Hong Kong, Thailand and the United Arab Emirates has made a breakthrough by launching its minimum viable product (MVP) platform, which will serve as a proving ground for more use cases in cross-border transactions.

As Project mBridge enters the MVP stage, the participation of both the public and private sectors will further expand. The Saudi Central Bank has joined as a full participant in the project, which has more than 26 observing members, according to announcements on Wednesday.

Since the project began in 2021, the four founding monetary authorities and the Bank for International Settlements (BIS) Innovation Hub have worked to utilise digital currencies built on distributed ledger technology (DLT) to enable instant cross-border payments and settlement.

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The MVP platform, based on a new blockchain called mBridge ledger, will serve as a "test bed for add-on technology solutions, new use cases and interoperability with other platforms", the BIS and the Hong Kong Monetary Authority said in separate press releases on Wednesday.

The new platform is compatible with the Ethereum blockchain, one of the largest distributed ledgers in the world. Ethereum hosts ether, the second-largest cryptocurrency by market capitalisation after bitcoin, and is known for creating programmable smart contracts that allow for various product types.

"We cordially invite other central bank peers to join us on this mBridge journey, whether as users to experience the benefits of the platform first-hand, or as co-developers to enhance cross-border payments together," said Eddie Yue Wai-man, CEO of the Hong Kong Monetary Authority (HKMA).

Private sector firms are also invited to propose solutions and use cases to further develop the platform.

During a pilot phase in 2022, 20 banks from the four jurisdictions used the mBridge platform to conduct and settle 164 payment and foreign exchange transactions, totalling more than US$22 million over six weeks.

Five commercial banks in Hong Kong have been onboarded to the platform: Bank of China (Hong Kong), Bank of Communications Hong Kong, HSBC, Industrial and Commercial Bank of China (Asia), and Standard Chartered Bank (Hong Kong).

"The continuous development of mBridge exemplifies that CBDCs are a viable means to enable real-time cross-border payments and foreign-exchange transactions that are high in speed, low in cost, more transparent and less complex," said Lewis Sun, global head of domestic and emerging payments at HSBC's global payments solutions.

A slide explaining the mBridge platform is shown during a panel discussion at Hong Kong FinTech Week on November 1, 2022. Photo: Matt Haldane alt=A slide explaining the mBridge platform is shown during a panel discussion at Hong Kong FinTech Week on November 1, 2022. Photo: Matt Haldane>

Standard Chartered's Hong Kong CEO Mary Huen also applauded the latest development of the mBridge project, which will prepare for "the launch of a new generation of cross-border payment ecosystems", she said in a statement on Wednesday.

BOCHK's deputy CEO, Xing Gui-Wei, said the bank would "further optimise product processes and provide new channels for corporate customers' cross-border transactions" under the mBridge MVP platform.

Governance and legal frameworks, including a rule book, have been formulated to match the decentralised nature of the platform.

The mBridge project aligns with Hong Kong's other CBDC initiatives that aim to promote the city as a hub for virtual assets and financial technology.

In March, the HKMA launched a "wCBDC" pilot to improve interbank wholesale settlements using tokenised money, a stablecoin sandbox to allow companies to trial cryptocurrency tokens pegged to fiat currency in the city and the second phase of its retail e-HKD pilot.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.