Platform focuses on inclusivity

Project mBridge — a platform for experimenting with central bank digital currencies (CBDCs) including the e-CNY for cross-border payments — is open to cooperation with traditional payment infrastructure and any US dollar usage, said officials and experts close to the matter.

They said mBridge primarily focuses on small-value transactions under the current account that have been underserved by banks, aiming at improving the efficiency and inclusiveness of global monetary and payment systems while facilitating cross-border trade and investment, especially among Asia's emerging economies.

Lu Lei, deputy governor of the People's Bank of China, the country's central bank, said that a CBDC system should not only be interoperable with other CBDC systems, but also with traditional payment systems and other financial market infrastructure modalities, and both are achievable by mBridge.

"We must avoid new cross-border payment frictions while removing existing ones," Lu said while addressing a Financial Street Forum event on Wednesday, titled Project mBridge: Bridging Global Economies with CBDCs.

Lu said that mBridge should step up addressing urgent pain points regarding cross-border payments that are undersupplied by banks — in particular payments in cross-border e-commerce and remittances — due to their small values and high costs.

Project mBridge resulted from collaboration beginning in 2021 between the Bank for International Settlements' innovation arm, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the PBOC and the Hong Kong Monetary Authority. The project aims to tackle inefficiencies in cross-border payments with new technologies.

Echoing Lu's remarks, an expert who requested anonymity told China Daily that mBridge is "compatible and inclusive" and is open to be connected with traditional payment systems, including large-value, small-value and rapid payment systems, as well as existing international payment infrastructures.

"Project mBridge represents a new technological approach. It is inclusive and does not rule out cooperation with anyone," the expert said.

The project reached the minimum viable product (MVP) stage in June, inviting private sector firms to propose new solutions and use cases that help develop the platform. The Saudi Central Bank joined mBridge as a participant of the MVP platform in June.

Among the mBridge participating economies, China, the United Arab Emirates and Saudi Arabia are also BRICS members.

Lu said the transaction value of mBridge has been growing steadily over the past few months, a telling sign of market confidence in the platform, without giving specific figures.

In terms of geographical coverage, Lu said mBridge may deepen collaboration with the Association of Southeast Asian Nations and Belt and Road economies, as these economies have close trade ties and stable geopolitical conditions, while cross-border payments and currency services may be underserved.

"Project mBridge, as a public good, may have a role to play in strengthening collaboration among them and thus facilitate the sound development of the international monetary and payment system," Lu said.

Citing the views that mBridge may impede the reputation and usage of the US dollars, Zhou Xiaochuan, vice-chairman of Boao Forum for Asia and a former governor of the PBOC, said that mBridge is primarily aimed at filling in gaps in the international payment system.

Project mBridge does not exclude US dollar usage, Zhou said at the same event as Lu, adding that relevant developments would depend on efficiency, cost, security and user choice.

The greenback and other "hard currencies" have been traditionally used in cross-border payments, which cannot fully satisfy demand in Asia in recent years amid the region's fast development of interconnections, giving rise to the growth of mBridge and other platforms to facilitate cross-border payments within the region, according to Zhou.

Zhou said that mBridge should first facilitate the payments and settlements of current account transactions, especially small-amount ones, aligning with the demand of Asian economies in terms of economic, trade and travel development.

As for some opinions that mBridge might have a substitutional relationship with financial telecommunication infrastructure Swift, Zhou said he deems mBridge more as a cross-border payment system.