Four Countries Test Multi-CBDC Arrangement

The Bank for International Settlements (BIS) on Wednesday (Oct. 26) published a report on Project mBridge, a four-nation collaborative pilot for cross-border central bank digital currencies (CBDCs).

The Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People’s Bank of China and the Central Bank of the United Arab Emirates participated in the project. During the pilot, 20 banks in the four jurisdictions used the mBridge platform to settle 164 foreign exchange transactions.

The recently completed pilot is BIS Innovation Hub’s latest investigation into CBDC’s cross-border applications.

Last month, it launched Project Ice Breaker to test interoperability between the proposed CBDCs of Sweden,  Norway and Israel.

See more: Sweden, Norway and Israel Central Banks Test Cross-Border CBDC Payments

The mBridge platform is an example of what the BIS calls a “multi-CBDC” arrangement, where different national CBDCs are exchanged within a single technical infrastructure.

In Project Dunbar, the first BIS project to explore multi-CBDCs, BIS proved that the concept was technically viable but faced many questions about how such a platform would work in practice. Two such questions were how to respect regulatory differences across jurisdictions, and what governance arrangements would give countries a sufficient sense of security to share their national payment infrastructure.

In the latest pilot, the BIS seemed to have addressed some of the governance issues. A press release announcing the successful mBridge pilot said the platform “ensures compliance with jurisdiction-specific policy and legal requirements, regulations and governance needs.”

The international organization also appears to have moved on to a more advanced analysis of technical design issues. For example, unlike previous multi-CBDC pilots, the mBridge project used a custom ledger rather than a pre-existing blockchain to record transactions.

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