MNI: China-led mBridge To Expand In Asia, EM Markets
MNI (BEIJING) - The China-led cross-border central bank digital currency payment platform mBridge is likely to add more participants from Asia and emerging-market central banks, insiders and advisors in China told MNI, as the U.S. signalled fierce opposition to any attempt by BRICS nations to bypass the dollar.
Among about 40 observing central banks, which include the Bank of Korea, Bank Indonesia, the Central Bank of Brazil and the Central Bank of Malaysia, many have engaged the Steering Committee to explore potential collaboration, an industry insider said.
The Bank for International Settlements withdrew from mBridge in October, as speculation mounted that it might overlap with a BRICS platform, but the source said the BIS’s departure would not hinder expansion.
Potential members include countries from ASEAN, some Gulf states, and African as well as BRICS countries with less advanced and globally connected financial systems, said Tu Yonghong, financial professor and deputy director of international financial institute at Renmin University, adding that mBridge’s transaction costs are expected to be less than a quarter of traditional platforms.
MULTILATERAL PROJECT
While the BOK has shown interest, other advanced economies more deeply engaged with the current financial system will likely remain as observers of the project rather than as participants in the short term, she said, calling mBridge a multilateral project and pushing back against suggestions it could be used as a dedicated BRICS bridge.(See MNI: China Not Closed To Discussing Deal On Yuan - Advisors)
U.S. President-elect Donald Trump tweeted on the weekend that the U.S. would impose 100% tariffs in retaliation to any attempt by BRICS countries to circumvent the dollar.
BIS chief Agustin Carstens has said mBridge no longer needed his organisation’s support, but also added that it could not be involved with any project involving sanctioned countries. mBridge was launched in 2021 as a collaboration between the BIS, China, Hong Kong, Thailand and the United Arab Emirates central banks. The Saudi Arabian central bank joined in June.
Zhao Xueqing, senior researcher at Bank of China, said the project would be attractive to Asian countries with close trade ties and which are already exploring central bank digital currency (CBDC) usage, and to oil exporters in the Middle East.
FURTHER USES
mBridge could also expand to include direct currency trading as well as a securities and derivatives settlement platform on top of cross-border trade facilitation. CBDC cross-border payments would significantly reduce exchange-rate risks and financial costs, Zhao added, though she acknowledged that technology, security and privacy protection, alongside policy, and regulatory coordination, will slow mBridge’s development.
Zou Chuanwei, director of the Frontier Financial Research Center at the Shanghai Institution for Finance and Development, said a supranational digital currency based on CBDCs could eventually be possible, though any change to the international monetary system would face a considerable political and market backlash.
Commercial banks in participating countries could use CBDCs via smart contracts on mBridge to reduce transaction chains, liquidity needs and counter party risk significantly, he said.