Hong Kong Monetary Authority (HKMA) It was published On Oct. 26, a report announcing the success and key findings of mBridge, a central bank digital currency (CBDC) project.
The report was jointly prepared by the Bank for International Settlements Innovation Hub (BISIH) Hong Kong Center, the Bank of Thailand, the People’s Bank of China and the Central Bank of the United Arab Emirates. We report the main findings and results of the project.
mBridge is a six-week cross-border CBDC pilot from 15 August to 23 September 2022. The author of the report and 20 commercial banks in four jurisdictions have made more than 160 payments through mBridge and in real value he has traded $22 million in foreign exchange. platform.
The report claims to use findings from project, policy, legal and regulatory analyses, to innovate the CBDC platform and move towards a minimum viable product and, ultimately, a full-fledged CBDC system. I’m here.
International and regional trade identified as mBridge’s first business use case
This project has identified international trade payments as the first business use case by supporting the growth of local FX markets in the jurisdictions participating in the project. The report covers a network of banks spread across different time zones and operating hours, credit risk and liquidity risk that could make settlement funds unavailable in the event of illiquidity or insolvency. It claims to solve the inefficiencies inherent in overpayments.
Other inefficiencies the report claims mBridge could solve include payment delays and lack of access to the global financial system between emerging market and developing economies. increase.
According to reports, mBridge also supports regional trade, which is mainly settled in foreign currencies. This will be achieved by replacing CBDC, thus reducing high transaction costs and reliance on foreign currency transaction settlements.
Key Lesson 1: Limited FX PvP Transactions
The report observed a limited number of FX Project-wide pay-to-pay (PvP) transactions instead of one-way payments. We concluded that means to facilitate liquidity provision, management functions, referrals to FX market makers, and FX price discovery should be integrated into the platform.
Key Lesson 2: Integrating mBridge with Wholesale Payment Systems
Another finding is that mBridge can be easily and seamlessly integrated with domestic wholesale payment systems, saving time and enabling straight-through processing. The report therefore concludes that the central bank’s ability to integrate each of his CBDCs, payment systems, issuance and redemption processes into his mBridge is critical to the success of the project.
The report also included feedback from participants on how mBridge could be improved. This includes building APR connections for interoperability with domestic systems and straight-through processing, involving more jurisdictions, currencies, and use cases. Finally, a more comprehensive legal governance structure will be required as the platform moves into production.