What is the mBridge Project?

About mBridge Project:

• mBridge is a cross-border payments platform designed to allow central banks to transact directly using central bank digital currencies (CBDCs).
• It is a joint project launched in 2021 between the Bank for International Settlements (BIS) innovation hub and 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 project aimed to explore a multi-CBDC platform shared among participating central banks and commercial banks, built on distributed ledger technology (DLT) to enable instant cross-border payments and settlement.
• Need for mBridge:
  • The project aimed to tackle key inefficiencies in cross-border payments, including high costs, low speed, and operational complexities.
  • It also aims to address financial inclusion concerns, particularly in jurisdictions where correspondent banking (which connects countries to the global financial system) has been in retreat, causing additional costs and delays.
  • The system is designed to potentially reduce the need for the US dollar to act as an intermediary currency.
• How does mBridge work?
  • The platform uses blockchain technology, which makes all the participating banks connect to the same network, which is shared among them.
  • The blockchain is a shared digital record which helps keep in tracking the transactions, including maintaining who has paid whom and how much.
  • Participating central banks as well as monetary organisations use their own computers on the mBridge network, which are called as validating nodes.
  • They play a role in maintaining the transactions that have taken place as well as also help in maintaining the shared digital record to maintain clarity on the transactions that have taken place.
  • This means that international payments no longer pass through several banks, rather they are settled directly through one shared platform, mBridge in this case.
• Why is it seen as China-led?
  • The mBridge platform is often said to be a China-led cross-border digital currency project.
  • China has been involved in this project since the very beginning in 2021, as the Digital Currency Institute of the People’s Bank of China was one of the founding partners.