China and UAE Central Banks Join “Multiple CBDC Bridge Study” To Enhance Cross-Border Payments

The Central Bank of the United Arab Emirates (CBUAE) and the Digital Currency Institute of the People’s Bank of China (PBC DCI) have joined Hong Kong Monetary (HKMA) in partnership with the Bank of Thailand (BOT) in the second phase of the Project Inthanon-LionRock.

According to the official announcement by HKMA, the addition of CBUAE and PBC DCI to Project Inthanon-LionRock was followed by a project name change to Multiple Central Bank Digital Currency (m-CBDC) Bridge.

Inthanon-LionRock was initiated in 2019 by HKMA and BOT as a central bank digital currency project to study how DLT can be leveraged to increase efficiency in cross-border payments. A 2020 report indicated the successful completion of the project with recommendations for future aspects like legal, operational, and technical aspects for Central Banks in cross-border transfers.

m-CBDC for DLT-based Cross-Border Payments

The m-CBDC Bridge is strongly supported by the Bank for International Settlements Innovation Hub Centre in Hong Kong. The project will build on the experience gained from the successful study of Inthanon-LionRock and explore more capabilities of DLT.

This will involve the development of a proof-of-concept (POC) prototype that will facilitate real-time cross-border foreign exchange payment-versus-payment transactions in a multi-jurisdictions context and on a 24/7 basis.

“The m-CBDC Bridge project will also explore business use cases in a cross-border context using both domestics and foreign currencies.”

Additionally, m-CBDC is expected to set the stage for other Central Banks in Asia to join the study and adopt DLT capabilities in cross-border transfers.

“The m-CBDC Bridge Project will further foster a conducive environment for more central banks in Asia as well as other regions to jointly study the potential of DLT in enhancing the financial infrastructure for cross-border payments.”

m-CBDC to Streamline Cross-Border Payments

The outcome of the m-CBDC is expected to smoothen various points prone to friction in the cross-border transfer process including high transaction costs and regulatory complexities.

The participating Central Banks are also expected to consider the results of the PoC prototype for further utility study of the m-CBDC Bridge. This will in turn be used to evaluate potential use for cross-border fund transfers, capital market transactions, and international trade settlement.

Asia’s research into the capability of Blockchain-based systems and application in various industries is accelerating the region’s race to overtake the world’s economy.

Apart from financial applications such as cryptocurrencies and DeFi, Asian countries have put a lot of effort and resources into developing blockchain technology, making Asia the blockchain Hub of the World.

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