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The Digital Currency Institute (DCI) of the People’s Bank of China (PBoC) has joined the second phase of a central bank digital currency (CBDC) project for cross-border payments that goes beyond Chinese territory, parties involved have stated.
The Multiple Central Bank Digital Currency (m-CBDC) Bridge Project, formerly known as Project Inthanon-LionRock, seeks to further “explore the capabilities of distributed ledger technology (DLT), through developing a proof-of-concept (PoC) prototype, to facilitate real-time cross-border foreign exchange payment-versus-payment transactions in a multi-jurisdictional context and on a 24/7 basis”, they say.
The project, initiated by the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT) in 2019, will also explore business use cases in a cross-border context using both domestic and foreign currencies, they add.
Aside from HKMA and BOT, China and the Central Bank of the United Arab Emirates (CBUAE) joined the initiative according to their Tuesday Feb 23 statement.
The CBUAE Governor, Abdulhamid M. Saeed Alahmadi, cites his bank’s recent wholesale CBDC PoC project with the Saudi Central Bank to settle domestic and cross-border transactions using central bank money on DLT, as an experience they plan to transfer to their participation in the m-CBDC Bridge project.
m-CBDC’s slow rise
The HKMA and the BOT had last year January announced the outcomes of and published a report on the Inthanon-LionRock CBDC research project which was created in May 2019 following the MoU signed between the two institutions to study the application of CBDC to cross-border payments.
At the time, a Thai Baht-Hong Kong Dollar cross-border corridor network prototype was developed to allow participating banks from the two countries to conduct funds transfers and foreign exchange transactions on a peer-to-peer basis thus helping to reduce settlement layers.
Upon completion in December 2019, they had developed a DLT-based PoC prototype with ten participating banks from both sides and key findings related to token conversion, real-time interbank funds transfer, foreign exchange execution, liquidity management and regulatory compliance were presented in their report.
Powered by Corda, R3’s blockchain platform, and with major banks like HSBC and Standard Chartered participating, the BOT Deputy Governor, Mathee Supapongse, said the novel cross-border model’s design and the project’s key findings added new dimensions to central bank communities’ studies on cross-border funds transfer area.
What m-CBDC could mean for China
The m-CBDC Bridge, supported by the Bank for International Settlements Innovation Hub Centre in Hong Kong, aims to “transcend all borders”. While still adopted by a few states, the m-CBDC project’s underlying proposition opens yet another window for China to build on its edge as a major economy at the forefront of the global CBDC race.
China has been going through a series of pilots of its digital currency electronic payment (DC/EP) across major Chinese cities ahead of a possible public rollout during next year’s Winter Olympics in Beijing.
China’s participation in a project like the m-CBDC which seeks “to improve wholesale cross-border payments with a streamlined intermediation model, real-time transfers and atomic Payment-versus-Payment (PvP) settlements” aligns with the Asian giant’s perceived agenda to globalize its digital yuan.
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