Banking News

China, UAE join Hong Kong, Thai cross border CBDC trials

asia cbdc

Today, four Asian central banks released a joint statement about a joint cross border central bank digital currency (CBDC) experiment. In 2019, the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand collaborated on Project Inthanon-Lion Rock. They both recently contracted with ConsenSys for a second iteration to trial a different technology. 

The announcement today is that the People’s Bank of China (PBoC) and the Central Bank of the UAE (CBUAE) will be joining the cross-border payment experiments. Inthanon-Lion Rock is being renamed to the “Multiple Central Bank Digital Currency (m-CBDC) Bridge“.

It aims to explore using distributed ledger technology for 24/7 real-time foreign currency transactions between countries. The proof of concept trial is endorsed by the BIS Innovation Hub, which works with numerous central banks on CBDC trials and mentioned the m-CBDC last month

The plan is to potentially expand the tests to other Asian nations and if successful, it could be used for cross border transfers and the settlement of both international trade and capital markets transactions.

Last year there was a political proposal in China to have a cross border stable currency to incorporate the yuan, Hong Kong dollar, Korean won and Japanese yen. This was a concept presented to the government rather than coming from the state.

China is the most advanced in terms of progressing its digital yuan CBDC. Three months ago, the HKMA said it was working with China on a technical pilot for the digital yuan or e-CNY to be used for cross border payments with Hong Kong.

Around the same time, the central banks of Saudi Arabia and the UAE shared their cross-border CBDC tests results. That experiment was unusual as the banks used a single currency. That’s because both the Saudi Riyal and UAE Dirham are pegged to the U.S. dollar at the same exchange rate.