This undated photo shows the building of the Hong Kong Monetary Authority. (PHOTO / IC)

The world’s largest multinational payment platform, mBridge, is expected to facilitate cross-border trade and solve issues on the connectivity of international settlements, experts said on Tuesday during Hong Kong FinTech Week.

The mBridge project was sponsored by the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre, with the participation of the People’s Bank of China’s Digital Currency Research Institute, the Hong Kong Monetary Authority, the Bank of Thailand and the Central Bank of the United Arab Emirates.

Colin Pou Hak-wan, executive director of financial infrastructure at the HKMA, said the project aims to solve issues on the connectivity of overseas payments and to facilitate international trade. The cross-border transfers could shorten from multiple days to near real-time, he said  

Colin Pou Hak-wan, executive director of financial infrastructure at the HKMA, said the project aims to solve issues on the connectivity of overseas payments and to facilitate international trade. The cross-border transfers could shorten from multiple days to near real-time, he said.

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“A next step would be to proceed to the minimal viable product stage. The (current) system is like a pile of platforms. There will be an enhancement and new functions to be added. … I think most importantly, we need to consider how to add value to the system so that the users will find an incentive to switch from the existing board of operation,” Pou said. 

Mu Changchun, director-general of the Digital Currency Institute, said the cross-border use of central bank digital currencies faces challenges of different regulatory requirements from hacking and technical standards across different jurisdictions. 

The reason to adopt distributed ledger technology in the mBridge project is that trust issues can be solved when different parties are involved, Mu said. “We have so many parties, like central banks and monetary authorities, each of us actually has a different regulatory system, different capital management system. … Distributed ledger technology is perfect for self-management or autonomy management by each jurisdiction (to address the issue).”

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Li Shu-pui, an adviser to the governor of the central bank of the UAE, said mBridge is the first large-scale central bank digital currency (CBDC) pilot project using real value transactions, covering cross-border trade settlements and interbank transfers. The project involves 20 commercial banks from four jurisdictions.

So far, a total of 164 transactions in a period of six weeks have been made under the program, worth over $22 million, he said. 

When talking about the system’s safety, Li said: “We need 100 percent data security, data privacy and sovereignty control. We need full control of our own infrastructure on operation. … We cannot tolerate any disruption.”

Vachira Arromdee, executive adviser of CBDC Projects at the Bank of Thailand, said the primary principle of adopting CBDC is “do no harm”. “CBDCs issued by one central bank should not or will not disrupt other central banks’ monetary policy of financial stability mandate,” she said.

The digital yuan, the Chinese mainland’s fiat virtual currency, was tested on the mBridge platform from Aug 15 to Sept 23. 

tianyuanzhang@chinadailyhk.com