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Monetary authorities in four Asian jurisdictions have already tested international settlements using state-issued digital currencies. Cross-border payments and foreign exchange transactions totaled over $22 million as part of a pilot project with the participation of the Bank for International Settlements.
Asian Central Bank Trials International Settlement with Real Value Using Digital Currency
Monetary policy regulators in China, Hong Kong, Thailand and the United Arab Emirates have already conducted experiments using their issued digital currencies for cross-border payments. The Bank for International Settlements (BIS) Innovation Hub Hong Kong Center announced the successful completion of the pilot.
The tests were conducted from August 15th to September 23rd and covered real value transactions. They are processed through a distributed ledger platform called Mbridge, a payments project launched in 2019 by the Hong Kong Monetary Authority, the Bank of Thailand and the BIS Innovation Centre. The People’s Bank of China and the Central Bank of the UAE will join in 2021.
In a Linkedin post, the BIS explained that during the trial, 20 commercial banks used the platform to settle various payments for corporate clients, mostly cross-border trade. “Over $12 million in value was issued on the platform, facilitating more than 160 cross-border payments and foreign exchange transactions with a total value of over $22 million,” it detailed.
Participants include China’s largest bank, Industrial and Commercial Bank of China, its Abu Dhabi brand and ICBC Asia’s subsidiary in Hong Kong, according to Financial News, the official newspaper of the People’s Bank of China. In addition, Bank of China Zhejiang Branch worked with HSBC and Siam Commercial Bank to make payments in digital yuan (eCNY) for two high-tech companies in Zhejiang province.
The report did not provide further details on other currencies in use, but apart from China, expand Pilot projects of eCNY, Hong Kong, UAE and Thailand are already testing central bank digital currencies (CBDC) Likewise, the South China Morning Post noted. The Hong Kong-based publication also said the experiment could weaken the dollar’s role in foreign trade if banks could settle directly without the greenback.
Other countries such as Russia are also targeting their own digital currency projects.According to a recent report, the Russian Federation intends to use the digital ruble for settlements with China, Ukraine’s main ally and trading partner in its geopolitical and economic conflict with the West. Moscow hopes to initiate a settlement with the CBDC early next year.
The Bank for International Settlements said in the announcement that it will publish a detailed report on the progress of the International Payments Project in October. The document will cover technical design, legal, policy and other regulatory considerations, and present a future roadmap for the Mbridge platform.
Do you expect a CBDC project like the one described in the report to challenge the dollar’s role in global trade? Share your thoughts on the topic in the comments section below.
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