Central banks from China, Hong Kong, Thailand and the United Arab Emirates this week said they are building out 15 business use cases for the multiple CBDC Bridge (mBridge) project — a multiple central bank digital currency (CBDC) platform — starting with international trade settlement.

The central banks, together with the Bank for International Settlement (BIS) Innovation Hub Hong Kong Center, are building a new payment infrastructure leveraging blockchain and CBDCs to significantly reduce the time — from days down to near-instantaneous — and costs of cross-border payment and settlement. 

The central banks are tackling the use case of international trade settlement as a priority, given that the total value of international trade transactions between the four participating jurisdictions amounted to over USD$730 billion, according to the World Bank.

Twenty-two finance industry heavyweights including the Bank of China, DBS, Dubai Islamic Bank, HSBC, ICBC, Goldman Sachs, Societe Generale and UBS are partnering with the central banks to test and expand the use cases of the mBridge trial platform.

Testing of sample trade settlement transactions across 11 industries and the four jurisdictions has already started on the mBridge platform and is expected to enter the pilot stage from 2022, with an aim to achieve a production-ready system to support the full process of international trade settlement and other potential use cases. Industries involved in the selected sample transactions included semiconductors, medical equipment and apparel.

“The objective of expediting cross-border payment could be easier to achieve through building new platforms rather than recalibrating or linking existing ones,” said Colin Pou, executive director (financial infrastructure) at the Hong Kong Monetary Authority (HKMA), in a panel discussion on “mBridge: Building a Multi CBDC Platform for international Payments” during the Hong Kong FinTech Week 2021 this week. “Now that the right climate is in place for global payments, we need to invest fast and we need to make sure we are doing it right.”

Hong Kong, Pou said, intended to prioritize mBridge use cases to facilitate money flow within the Greater Bay Area, which would reinforce its status as an international financial center.

Shu-Pui Li, advisor at the governor office of the Central Bank of UAE, said the business case for mBridge was strong. “Mbridge cannot be just purely a replacement or alternative to correspondent banking networks,” Li said. “We need to make a difference using mBridge and make it a win-win situation for all participants with better added service.”

Bénédicte Nolens, head, BIS Innovation Hub Centre Hong Kong, who moderated the panel discussion, said the mBridge prototype showed that payments could be made in under two seconds compared to three to five days typically needed for such transactions. “What we need on top of that is bringing the users along,” Nolens said. “That’s why we now have the use cases and we’re starting a more active interaction with the private sector to make this succeed.”

The mBridge project uses “an agile and iterative development approach, combined with a modular bricks design that enables participating jurisdictions to contribute functionality, connectivity and interoperability with existing and future systems,” according to a brochure jointly released by the central banks and BIS.

“All jurisdictions can have the option to develop their own part in accordance with their own pace,” said Mu Changchun, director-general of the Digital Currency Institute of the People’s Bank of China. “This is a very flexible architecture, ensuring the flexibility of mBridge and accommodates different needs from every jurisdiction.” Mu, who leads the technical subcommittee of the mBridge project, was also a speaker on the panel.

China is close to launching its retail CBDC, the e-CNY. Speaking at another panel session on “Retail CBDC: A Lesson from the Fast Movers & the Road Ahead” at the Hong Kong FinTech Week, Mu said 140 million individuals have opened their wallets, and 10 million corporate wallets have been created as of October 2021, with e-CNY transactions amounting to RMB 62 billion (US$9.7 billion). 1.55 million merchants now accept e-CNY payment, including utilities, catering services, transportation, shopping and government services. 

See related article: Chinese police raid what may be the nation’s first e-CNY money-laundering case

Close to 90% of central banks are now actively exploring or developing CBDCs, according to a BIS survey and many central banks have ramped up their research and development efforts over the past year.

Aside from the mBridge project, the BIS is also working on two other wholesale cross-border CBDC projects: Project Dunbar, which brings together the central banks of Australia, Malaysia, Singapore and South Africa, as well as Project Dura, which involves the central banks of France and Switzerland collaborating with a private sector consortium led by Accenture, with Credit Suisse, Natixis, R3, SIX Digital Exchange and UBS.

See related article: BIS: cooperation essential for CBDCs to improve cross-border payments