There is still no timeline for mBridge to go live

Written by Kapronasia || February 27 2024

Undertaking cross-border payments involving central bank digital currencies (CBDCs) is a complicated endeavor, and despite some media hype in the summer of 2023, the mBridge project of the Bank of International Settlements (BIS) and the central banks of mainland China, Hong Kong, Thailand and the United Arab Emirates (UAE) did not launch late last year. Many questions remain about the ultimate utility of using CBDCs in cross-border payments as well as any attempt to directly challenge the US dollar in global financial flows. 

MBridge’s most recent milestone occurred in January when the UAE made its first cross-border payment using the system. It was not a coincidence that the US$13.6 million digital dirham payment was made to China on the eve of the first BRICS meeting since it expanded from five to 10 member countries. The UAE joined BRICS at the beginning of 2024. It is hard to not see the symbolism here, since some BRICS countries talk a lot about increasing local currency payments and reducing their dependence on the dollar.

We do wonder if the benefits that mBridge purports to offer are significant enough to offset the costs of building and maintaining new payments infrastructure. According to China’s Digital Currency Research Institute (DCRI), mBridge transactions take seven seconds and cut cross-border payment costs by 50%. Of course, we should keep in mind the DCRI’s role in developing the technology that underpins mBridge. It has a vested interest in the project’s success.

Meanwhile, some of the project’s boosters say that CBDCs could cut out correspondent banking completely. We will not hold our breath.

For its part, the BIS has been firm about not committing to a timeline for mBridge’s formal launch, which suggests that there are some unanswered questions about the project’s viability. As BIS is the de facto organizer of mBridge and also the most neutral party involved in the project, its word carries weight.

In contrast, in September 2023, Hong Kong Monetary Authority (HKMA) CEO Eddie Yue said that that “very soon we will launch what we call a minimum viable product (MVP)” that would “pave the way for the gradual commercialization of mBridge.” He later told The South China Morning Post that the MVP launch would occur in the first half of 2024. Given the leading role China is playing in mBridge, it is not surprising that the Hong Kong central bank is enthusiastic about the project.

During a January press conference, BIS Innovation Hub head Cecilia Skingsley said that “once the MVP is finalized, we need to have a good look at the lessons learned and see together with the partner central banks, is there a next phase?” And if so, “what could that look like?

An important factor to keep in mind looking ahead is whether the BIS remains a key player in mBridge. To be sure, the central banks of China, Hong Kong, the UAE and Thailand could pursue the project on their own, but in that case, the nature of the initiative would transform – likely in some unpredictable ways.