Over the past couple of months there have been an increasing number of announcements about Chinese banks executing cross border payments using mBridge, the cross border CBDC initiative. In July several branches of state-owned banks said they executed transactions. A key change is the involvement of non-state banks in July, followed by regional banks in August, suggesting activities in China have moved to a new phase.
This mirrors what happened with the rollout of the digital RMB pilot. The first direct participants in the domestic CBDC were the six big state-owned banks, followed by the two private banks, Tencent-backed WeBank and Ant-backed MyBank. In the next phase, other banks connected to the digital RMB backbone via the state-owned participants.
To understand the significance of this progression, it’s worth examining mBridge’s development. The project was originally an initiative of the BIS Innovation Hub in Hong Kong in conjunction with the central banks of Hong Kong, Thailand, China and the UAE. It is a DLT solution that sidesteps Swift for cross border payments, enabling the final settlement of payments within seconds and reportedly at half the cost.
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