Monetary authorities in four Asian jurisdictions tested international payments using state-issued digital currencies. Cross-border payments and foreign exchange transactions totaling over $22 million were made as part of a pilot project involving the Bank for International Settlements.
Central banks in Asia piloted international settlement of real value in digital currencies
Monetary policy authorities in China, Hong Kong, Thailand, and the United Arab Emirates conducted a trial of cross-border settlement using digital currencies issued by each. The success of the trial was announced by the Bank for International Settlements (BIS) Innovation Hub Hong Kong Center.
The tests, which ran from August 15 to September 23, covered real-value transactions. They were processed through a distributed ledger platform called Mbridge, a payments project launched by the Hong Kong Monetary Authority, the Bank of Thailand, and the BIS Innovation Hub in 2019; in 2021, the People’s Bank of China and the UAE Central Bank joined.
During the pilot period, 20 commercial banks adopted the platform to make various payments for corporate clients, mainly in cross-border trade, the BIS explained in a post on Linkedin.” It detailed that “more than $12 million was issued to the platform, facilitating more than 160 cross-border settlements and FX transactions totaling more than $22 million.
According to Financial News, the official newspaper of the People’s Bank of China, participants included the country’s largest financial institution, Industrial and Commercial Bank of China and its Abu Dhabi brand and ICBC (Asia) subsidiary in Hong Kong. In addition, Bank of China, Zhejiang Branch settled in digital renminbi (eCNY) with HSBC and Siam Commercial Bank for two high-tech companies in the province.
The report does not provide details on other currencies used, but in addition to China, which is expanding its eCNY pilot project, Hong Kong, the United Arab Emirates, and Thailand are also expanding their central bank digital currency (CBDCtesting, notes the South China Morning Post. The Hong Kong-based publication also notes that the experiment could weaken the role of the U.S. dollar in foreign trade if banks are able to settle payments directly without the greenback.
Other countries, such as Russia, are aiming to do the same with their own digital currency projects. According to recent reports, the Russian Federation intends to use the digital ruble for settlements with China, a key ally and trading partner in its geopolitical and economic conflict with the West over Ukraine. Moscow hopes to begin settlements with CBDC early next year.
In its announcement, the BIS said it plans to release a detailed report on the progress of the international settlement project in October. The document will cover aspects such as technical design, legal, policy, and other regulatory considerations, and will present a roadmap for the future of the Mbridge platform.
Image credits: Shutterstock, Pixabay, Wiki Commons