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HKMA “mBridge” Crosses Borders with CBDCs in Innovative MVP Release Next Year

The Hong Kong Monetary Authority (HKMA) has revealed that mBridge, a platform facilitating cross-border transactions for various central bank digital currencies (CBDCs), is expected to enter the "minimum viable product (MVP)" stage by early 2024.

Key Points

  • The HKMA has announced that the mBridge project, which aims to establish a cross-border network for multiple CBDCs, is expected to reach the “MVP” phase. 
  • The primary goal of the mBridge initiative is to develop a platform that enables real-value cross-border payments and foreign exchange transactions using CBDCs.
  • Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority, has recently travelled to United Arab Emirates to discuss on CBDCs with the local banks.

In a bid to further strengthen cross-border cooperation and promote the use of digital currencies, Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority, recently traveled to the United Arab Emirates. During his visit, Yue engaged in talks with local central banks and other financial institutions, highlighting the progress made in the development of the cross-border network for central bank digital currencies, mBridge.

According to Yue, the project is expected to enter the “minimum viable product (MVP)” stage early next year, marking a significant step forward in its implementation. At present, the project has already seen the involvement of central banks from mainland China, Hong Kong, Thailand, and the United Arab Emirates, with talks underway for two additional central banks to join the initiative.

With more central banks expected to come on board in the lead up to the MVP stage, the mBridge initiative represents an exciting development in the world of digital currencies, promising to facilitate greater cross-border financial cooperation and innovation.

Primary Goal of the mBrige Project

Yue had a clear objective in mind as he kicked off the discussion–to solve the problems hindering mBridge’s progress and propel it into the MVP stage. His ultimate aim? To make trade settlement more affordable and efficient. While some may assume that technical issues pose the biggest threat to mBridge’s growth, Yue believes that the real challenge lies in coordinating regulatory requirements, governance methods, and ensuring currency liquidity.

To shed light on the matter of regulation, Yue emphasized the difficulty in accommodating varying regulatory requirements across different regions. With anti-money laundering (AML) and capital control regulations to consider, harmonization becomes a key factor. Despite the many hurdles, mBridge has a distinct advantage in that it can drastically reduce cross-border remittance time to mere seconds, a sharp contrast to the industry norm of 3-5 days. Unfortunately, if each bank must follow its own AML rules, the entire process becomes painfully slow.

The Liquidity Roadblock

Liquidity also poses a major challenge, and Yue has put forth some potential solutions. One suggestion is exploring the possibility of on-chain banks providing liquidity support in the absence of Hong Kong Monetary Authority’s digital currency (CBDC). 

Additionally, the central bank could also offer liquidity support, but there are concerns around collateral collection and ensuring banks have adequate foreign exchange liquidity to prevent excessive bid-ask spreads.Enter the mBridge project – a venture with a vision to create a platform for real-value cross-border payment and foreign exchange transactions using CBDCs. The team behind the project successfully completed a pilot, and now, in collaboration with the HKMA, is striving to develop the mBridge platform into a fully functional system. The potential impact of the mBridge project is significant, and it’s exciting to see how it will shape the future of cross-border transactions.

End Note

In the world of cross-border transactions, cost and efficiency are of the utmost importance. Yue, the visionary behind the mBridge project, seeks to eliminate any obstacles that may hinder the speed or affordability of these transactions. With 15 central banks and international organizations as observer members, and two in talks to join, the mBridge project has the potential to revolutionize the way we handle cross-border payments and foreign exchange transactions.

The mBridge project is a game-changer in the world of CBDCs, as it creates a platform for central banks to connect and facilitate transactions. The project’s MVP stage is slated to begin in early 2024, as participating central banks test the platform for compatibility. With the potential to transform the way we make payments, CBDCs are the future of cross-border transactions. And the mBridge project is just the beginning.and conduct financial transactions, and they offer faster and more efficient transactions, increased financial inclusion, and greater transparency.