Hong Kong Monetary Authority confirmed this alliance for the development of this project. There is a precedent of a similar initiative between Hong Kong and Thailand.
In recent days, the monetary authorities of China, the territory of Hong Kong, the United Arab Emirates, and Thailand reached an agreement. They seek to open the doors to develop a digital currency that multiple Central Banks issue. The objective of this project is to facilitate cross-border payments in the region.
The Hong Kong government confirmed this international alliance. They revealed that the name of the initiative is “Bridge between digital currencies from multiple central banks” (m-CBDC Bridge).
Precedents that they mention in the statement lead to think that it is a common cryptocurrency. However, they do not provide technical details on the development and may be seeking to create a bridge between different central bank digital currencies.
“The m-CBDC Bridge project will explore the capabilities of distributed ledger technology (DLT) by developing a proof-of-concept prototype. This will make it possible to facilitate the real-time crossing of cross-border transactions in a multi-jurisdictional context. That will happen 24 hours a day and 7 days a week,” the Hong Kong authority detailed.
According to the official statement, they hope to be able to use this project to “alleviate the pain points in cross-border transfers.” These problems mainly include “inefficiencies, high costs and complex regulatory compliance.”
One of the precedents of m-CBDC Bridge is the 2019 LionRock project, which sought to facilitate trade between Hong Kong and Thailand. They would do this by developing a token that specifically focuses on cross-border payments between those countries. In the current document, the Hong Kong government recognizes the learning that the “research project” generated.
In the case of the United Arab Emirates, they are also working together with Saudi Arabia to develop a common digital currency. For a year, they conducted Project Aber (“crossing borders” in Arabic) as a pilot study. With it, they sought to test the viability of a common electronic currency between nations. The resulting report indicates that this experience was “a step forward” in the development of this type of financial instrument.
China Wants to Expand the Use of Its Digital Currency
Of the four countries that constitute this international alliance, the most advanced in the development of its digital currency is China. Although the digital yuan (e-Yuan) is still in the testing phase, it may be fully operational next year. At that time, the Winter Olympics will be held in the city of Beijing.
There is a growing interest in using central bank digital currencies in the countries of the region. This aligns with China’s plans to expand the e-Yuan internationally. This became evident after the recent agreement with SWIFT, the administrator of the network that most people use for bank transfers globally.
Concerning Latin America, Brazil is the country that sets the standard for central bank digital currencies. Its Central Bank announced in 2020 that they would study the possibility of issuing their own digital currency.
By Alexander Salazar
