Multiple central banks and financial institutions have successfully completed a range of real-value cross-border transactions involving central bank digital currencies ( CBDCs ).

Conducted under Project mBridge, the six-week activity represented the largest cross-border CBDC pilot to date, in which 20 banks in four jurisdictions used a common platform to conduct over 160 payment and foreign exchange transactions totalling more than US$22 million. It was among the first multi-CBDC projects to settle real-value, cross-border transactions on behalf of corporates.

The participants included the Hong Kong Monetary Authority ( HKMA ), the Bank for International Settlements Innovation Hub ( BISIH ) Hong Kong Centre, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China and the Central Bank of the United Arab Emirates.

"The HKMA is very pleased to have completed the pilot successfully together with the BISIH and fellow co-founding members of Project mBridge,” says HKMA deputy chief executive Howard Lee. “We sincerely hope that the central banking community will find our pilot insights useful to their own exploration for using CBDC to expedite cross-border payments, and encourage them to join Project mBridge either as an observer or participant to maximize the network effect and realise the potential of the project to the fullest."

Blockchain-enabled

The mBridge platform is based on distributed ledger technology ( DLT ) upon which multiple central banks can issue and exchange their respective CBDCs.

The project proponents believe that an efficient, low-cost and common multi-CBDC platform can provide a network of direct central bank and commercial participant connectivity, greatly increasing the potential for international trade flows and cross-border business at large.

To test this proposition, a new native blockchain – the mBridge ledger – was custom-designed and developed by central banks for central banks, to serve as a specialized and flexible platform implementation for multi-currency cross-border payments.

Between August 15 and 23 September 23 2022, 20 commercial banks from Hong Kong SAR, mainland China, the UAE and Thailand conducted payment and foreign exchange ( FX ) payment versus payment ( PvP ) transactions on behalf of their corporate clients using the CBDCs issued on the mBridge platform by their respective central banks.

The pilot advances multi-CBDC experimentation by settling real value directly on the platform and on behalf of corporate customers. Over US$12 million was issued on the platform, facilitating over 160 payment and FX PvP transactions totalling more than US$22 million in value.

Cross-border settlement

Bank of China ( Hong Kong ) was among the first batch of banks participating in the project. “By leveraging our expertise and strength in cross-border settlement, financial technology innovation and trade business, BOCHK has completed real-value cross-border CBDC trades on behalf of corporates with six commercial banks from China, the United Arab Emirates and Thailand,” says Huang Jinyue, general manager, digital currency task force, at BOCHK.

During the pilot testing, the bank conducted cross-border transactions in Hong Kong dollar CBDC ( e-HKD ), carried out prototype verification of Chinese yuan CBDC ( e-CNY ) liquidity provision solutions, and worked with a number of customers to verify the FX  transaction function between different CBDCs.

“We will continue to proactively explore CBDCs and accumulate hands-on experience, collaborating closely with relevant regulators to play an active role in promoting the development of CBDCs in cross-border financial services and innovative projects,” Huang adds.