Saudi Arabia has recently become a full participant in Project mBridge, a cross-border central bank digital currency trial dominated by China. This move, announced by the Bank for International Settlements, may signal a shift away from using the U.S. dollar in a significant portion of the world’s oil trade. Project mBridge is the outcome of a thorough collaboration that commenced in 2021 involving the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People’s Bank of China, and the Hong Kong Monetary Authority.
The Saudi Central Bank has become a full participant in mBridge, and there are now over 26 observing members.
This development has the potential to have a significant impact on the global financial landscape and could potentially reshape the dynamics of international trade and currency usage. Financial analysts are watching closely to see how this trial progresses and how it will influence the future of global finance. The Bank for International Settlements (BIS), which acts as an umbrella organisation for global central banks, has made an announcement regarding the progress of mBridge.
According to the BIS, mBridge has now advanced to the “minimum viable product” stage, signifying that it has moved beyond the prototype phase. Notably, approximately 135 countries and currency unions, comprising 98% of global GDP, are investigating central bank digital currencies (CBDCs). However, due to the use of new technologies, cross-border transactions involving these currencies are both technically challenging and politically sensitive.
The advanced cross-border Central Bank Digital Currency (CBDC) project has recently gained the participation of a major G20 economy and the world’s largest oil exporter. This milestone is expected to pave the way for a surge in commodity settlements on the platform conducted in currencies other than the US dollar over the next year. This transition had already been in progress between China and Saudi Arabia, but it will now be bolstered by the implementation of new technologies.
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The mBridge transactions can utilise the same code that China’s e-yuan is based on. This code is accessible to the project’s 26 other ‘observing members,’ which include institutions such as the New York branch of the Federal Reserve, the International Monetary Fund, and the European Central Bank. The BIS also announced that the mBridge platform is now compatible with the Ethereum Virtual Machine, which is a crucial component of the network used by the Ether cryptocurrency.
Project mBridge
The project is focused on addressing the challenges associated with cross-border payments, aiming to reduce costs, increase speed, and simplify operations. It also aims to promote financial inclusion, especially in areas where correspondent banking is dwindling, leading to added expenses and delays. The utilisation of a new blockchain, the mBridge Ledger, has enabled the creation of a platform for real-time cross-border payments and foreign exchange transactions. A successful pilot with actual transactions took place in 2022, and efforts are now underway to transform the prototype into a minimum viable product (MVP).
The Bank for International Settlements (BIS)
The Bank for International Settlements (BIS) was founded in 1930 and is owned by 63 central banks, representing nations from across the globe, which collectively make up about 95% of the world’s GDP. Its headquarters is situated in Basel, Switzerland, with branch offices in Hong Kong SAR and Mexico City, as well as Innovation Hub Centres worldwide.
The BIS’ mission is to support central banks in achieving monetary and financial stability through international cooperation and to serve as a bank for central banks.
To accomplish this mission, the BIS offers central banks:
– A platform for dialogue and extensive international cooperation
– A space for responsible innovation and knowledge-sharing
– In-depth analysis and insights on key policy issues
– Sound and competitive financial services
To fulfil its mission effectively and adapt to the evolving nature of its business, the BIS operates based on strong core values that shape its work culture. These values are the shared principles and beliefs that unite the staff and guide their actions to support central banks through current and future challenges.
The core values are as follows:
– Delivery of value through excellence in performance
– Commitment to continuous improvement and innovation
– Acting with integrity
– Fostering a culture of diversity, inclusion, sustainability, and social responsibility
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