In late October, Bloomberg reported that BIS general manager Agustin Carstens said in Washington during a meeting of the Group of 30 that “we cannot directly support any project for the BRICS because we cannot operate with countries that are subject to sanctions — I want to be very clear about that.” MBridge did not start out as a BRICS initiative – rather it began with the central banks of China, Hong Kong, Thailand and the United Arab Emirates – but Russian President Vladimir Putin recently proposed the creation of a BRICS Bridge for the group. The technology of BRICS Bridge would be similar to mBridge’s. The objective would be to make the participants’ economies independent of the U.S.-dominated global financial system, Putin said.
While Russia may have a strong interest in developing a BRICS Bridge, we reckon that other members of the bloc are less eager to topple so-called “dollar hegemony.” While China has long sought greater internationalization of the renminbi, particularly in trade settlement, it has worked on this objective stealthily. Joining hands with Russia in a BRICS Bridge would be a bold move that could result in unpredictable knock-on effects. Meanwhile, India and South Africa may wish for the BRICS bloc to help its respective members gain a stronger presence on the international stage, but they are not keen to disrupt the dollar-led financial system.
With that in mind, Putin’s proposal may end up going nowhere, while mBridge itself could very well carry on. It is important to note that while there are just five core members (the four founding central banks and Saudi Arabi), there are 32 observing members, among them the Reserve Bank of Australia, the Bank of Korea FATF and the Banque Central du Luxembourg. Many of the observing members are strong backers of the existing international financial system and are interested in using CBDCs within that system, not to circumvent it.
Additionally, even if BIS tried to pull the plug on mBridge, it may be too late for that. Indeed, mBridge recently took an important step forward with the completion of its minimal viable product (MVP) stage. The MVP platform can undertake real-value transactions (subject to jurisdictional preparedness) and is compatible with the Ethereum Virtual Machine (EVM), a decentralized virtual environment that executes code consistently and securely across all Ethereum nodes. MVP thus is suitable as a testbed for new use cases and interoperability with other platforms.