• Here’s why Ethereum is testing a multi-CBDC bridge

  • The world is watching the race to launch the first CBDC with bated breath. While most people are focused on China’s digital yuan pilot, a group of countries has banded together to take CBDCs to the next level.

    In Phase 3 of Project Inthanon-LionRock, the BIS Innovation Hub Hong Kong Centre, the People’s Bank of China’s Digital Currency Institute, and the Central Bank of the United Arab Emirates experimented with a multi-CBDC bridge, or a mBridge.

    What exactly does this mean?

    The mBridge initiative aims to make it possible for central banks in different countries to issue and redeem their own CBDCs across borders on a common platform, without the need for correspondent banks.

    Commercial banks would be able to “submit peer-to-peer CBDC push payments” in the meantime.

    According to the BIS report from September 2021,

    “If successful, a multi-currency, multi-jurisdictional multi-currency, multi-jurisdictional multi-currency, multi-jurisdictional multi-currency, multi-jurisdictional multi-currency, multi-jurisdictional multi-currency, multi-jurisdictional multi-currency, multi-jurisdictional multi-currency, multi-jurisdictional multi-currency, multi-jurisdiction

    The report went on to say,

    “The prototype demonstrates a significant improvement in cross-border transfer speed from multiple days to seconds, as well as the potential to reduce several core costs of correspondent banking.”

    It’s also worth noting that the project’s Phase 2 prototype was built on Ethereum. This was due to the fact that the blockchain ledger and smart contracts were located in the prototype’s core layer.

    Notes on Specifications

    Regulation and compliance were functional requirements as a multiple CBDC project. Central banks would be able to track transactions in real time, set balance limits, monitor the balances held by commercial banks, and conduct surveillance using data.

    Scalability was also incorporated into the design in order to accommodate more participants and jurisdictions in the future.

    One complication, however, was the wide disparity in remittance charges between countries. While the global average was calculated to be 6.38 percent of the remitted amount, the report noted that even a percentage as low as 1% would be prohibitively expensive for payments in the millions of dollars.

    China’s latest news

    Along with the mBridge project, China has been accelerating its CBDC program.

    Changchun Mu, Director-General of the People’s Bank of China’s DCI. confirmed the existence of e-CNY pilots in ten areas

    Mu continued,

    “Payment methods such as QR code and tap-and-go have been well-supported, and innovative services such as dual-offline payment and wearable device payment have been safety and efficiency tested.”

    Meanwhile, Howard Lee, Deputy Chief Executive of the Hong Kong Monetary Authority, speculated on the possibility of an e-HKD.

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