BIS pilots bank-to-bank digital currency transfers

Central Bank Digital Currencies

The Bank for International Settlements (BIS), ‘the central bank of central banks’, has announced it has delivered a successful pilot of real-value and real-time cross-border transfers of central bank digital currencies (CBDCs).

The pilot, part of the BIS’s ‘Project mBridge’, is also the first BIS project to achieve the successful transfer of CBDCs between commercial banks.

A total of 20 banks (including local arms of HSBC, Standard Chartered, and the Bank of China), covering four jurisdictions (Hong Kong, Mainland China, Thailand, and the UAE), were part of the mBridge pilot, which conducted 164 payment and foreign exchange transactions over a six-week trial period.

In total, more than US$22 million was transferred and settled via mBridge over this period, the BIS confirmed.

mBridge (originally known as Inthanon-LionRock before being re-christened as mBridge in late 2021) is a custom-built, blockchain-backed platform providing, the BIS says, a “specialised and flexible platform for [the] implementation of multi-currency cross-border payments in central bank digital currencies (CBDCs)”.

“mBridge adopts a single-platform, direct-access CBDC model – a common technical infrastructure hosting multiple CBDCs, on which local and foreign financial institutions can directly hold and transact in CBDCs issued by central banks, irrespective of jurisdiction,” the BIS wrote in its pilot report.

By virtue of its common platform design, mBridge provides effective interoperability between domestic traditional clearing systems, enabling multiple jurisdictions to directly reach each other on a single, integrated platform.

The platform was specifically designed to be low-cost and easy access, serving to reduce barriers to entry and ultimate increase international trade flows and global cross-border business – a key priority for the BIS.

mBridge has been hailed by the BIS for its potential to improve global financial inclusion and open access to next-gen payments infrastructure.

“By enabling peer-to-peer 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,” the BIS said.

Cecilia Skingsley, who heads the BIS Innovation Hub, said the 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 will continue to develop and test the mBridge platform “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”.

Four central banks were involved in the pilot – the Hong Kong Monetary Authority (HKMA), the Bank of Thailand (BoT), the Digital Currency Institute of the People’s Bank of China, and the Central Bank of the United Arab Emirates – which was led by the BIS Innovation Hub Hong Kong Centre, who assumed the reins of the Project mBridge in 2021.

mBridge has its origins in 2017 in early CBDC experiments conducted by the HKMA (known at the time as LionRock) and the Bank of Thailand’s Inthanon project, initiated in 2018.

A merger of the BoT and HKMA programs in 2019 (known as Inthanon-LionRock Phase 1,) saw the development of a proof of concept single-corridor network designed to enable Hong Kong SAR and Thailand commercial banks to conduct fund transfers and foreign exchange transactions on a peer-to-peer basis in Hong Kong dollar (HKD) and Thai baht (THB) wholesale CBDCs.