The Bank for International Settlements (BIS) has released full details of its mBridge pilot project to use central bank digital currencies (CBDCs) for foreign exchange. Commercial banks from four jurisdictions made cross-border transfers using CBDCs and distributed ledger technology (blockchain) in the project, which was heralded as a success.
Twenty commercial banks from Hong Kong, China, the United Arab Emirates and Thailand used the bespoke mBridge Ledger platform and CBDCs issued by their respective central banks to conduct payment and foreign exchange transactions on behalf of their corporate clients between 15 August and September 23. More than USD 12 million was issued on the platform, facilitating more than 160 transactions worth more than USD 22 million.
The mBridge Ledger platform used a single-platform direct access infrastructure to perform real-time peer-to-peer transactions with the HotStuff+ consensus mechanism. The dynamic threshold consensus protocol Dashing is also being tested.
The project brought to light a series of political challenges. According to the authors, the legal categorization of a CBDC is the most pressing issue. They write:
“The typical question is whether CBDC on the platform would be classified as a currency, a representation of funds held with the central bank, a debt, or something else.”
The new technology raises even more fundamental questions than that:
“Expanding access to central bank money directly to foreign participants and conducting transactions on a shared ledger requires further study of policy, data privacy and governance considerations.”
Practical issues to be addressed in 2023 and 2024 include the integration of liquidity management and currency pricing.
The BIS Innovation Hub Hong Kong Center has produced a series of documents in recent days. The BIS center, along with the Hong Kong Monetary Authority (HKMA) and the United Nations Global Innovation Center on Climate Change, published the results of its Genesis 2.0 project to create tokenized green bonds on Oct. 24. The BIS and the HKMA have studied retail and wholesale CBDCs separately. On October 21, they published the latest report on their Project Aurum retail CBDC project.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.