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National banks build blockchain CBDC platform for faster international payments

The banks ran a pilot test where 164 payment and foreign exchange transactions were completed, totalling over $22 million over the six weeks

Major national banks have successfully completed trials of a co-developed blockchain platform that could see a faster uptake of central bank digital currencies (CBDCs) across global commercial banks.

National banks that took part were the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China, and the Central Bank of the United Arab Emirates, Bank of International Settlements (BIS) revealed this week.

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The banks custom-built the mBridge platform which was based on a new blockchain called the mBridge Ledger which aims to support real-time, cross-border payments and foreign exchange transactions using CBDCs. 

As part of ongoing efforts, it's thought the success of the platform will help deliver faster, cheaper, and safer cross-border payments and settlements.

Many jurisdictions, in particular emerging and developing economies, are losing access to the international network of correspondent banking services, leaving many households and firms without sufficient or affordable access to the global financial system for payments, the BIS said.

The experiment was designed to operate across different jurisdictions and currencies, to explore the capabilities of distributed ledger technology, and the application of CBDC in cross-border payments between commercial banks

Real corporate transactions were tested during the pilot. These centred around international trade and involved the central banks, selected commercial banks, and their customers. 20 banks in the four jurisdictions were able to conduct 164 payment and foreign exchange transactions totalling over $22 million over six weeks.

By enabling peer-to-peer technology and instant exchange of multiple CBDCs on a single network, Project mBridge aims to solve long-standing inefficiencies in cross-border payments and foster greater financial inclusion and innovation in international payments.

"Financial exclusion is not just a problem for individuals; it is also affecting economies," said Cecilia Skingsley, head of the BIS Innovation Hub. "This project makes important strides towards developing a platform that has the potential to foster more inclusive and efficient payments systems that will benefit those making and receiving payments in different currencies and jurisdictions as well as the overall functioning of the global financial system."

The BIS said it would continue to work on this and similar projects to explore the user requirements, technical specifications, and governance framework needed for interoperable CBDCs.

The mBridge project team will continue building the technology and testing it with a view to producing a product with enough features to be used by early adopters in the year ahead and a production-ready system thereafter

This isn’t the first time central banks have come together to trial CBDC technology. In September 2021, the reserve banks of Australia, Singapore, Malaysia, and South Africa partnered to test CBDC use for international settlements, hoping it would reduce the time and costs for these types of transactions. It aimed to develop a prototype shared platform for cross-border transactions using multiple CBDCs.

The UK has considered experimenting with CBDCs but a House of Lords committee said this year there was "no convincing case" for adopting a digital centralise currency that could risk financial instability.

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