According to an official Bank of Thailand brochure, 15 potential business use cases for CBDCs (Central Bank Digital Currencies) are being tested.
The institutions involved
As many as 22 companies and four institutions from four jurisdictions are participating in the project:
- Hong Kong,
- The United Arab Emirates.
It is a collaboration between the Bank of Thailand, the Central Bank of the United Arab Emirates, Hong Kong’s Monetary Authority (HKMA), the People’s Bank of China and the Bank of International Settlements (BIS), with the aim of reducing costs and improving the speed of international transactions.
Ongoing tests for CBDCs
The companies involved include Goldman Sachs, HSBC, Société Générale and China’s six largest state-owned banks.
The pilot project will begin in 2022, and envisages that:
- Goldman Sachs Asia will test the issuance of tokenized bonds with “atomic” settlement,
- DBS Bank Hong Kong will test cross-border insurance payments between mainland China and Hong Kong,
- HSBC will test programmable trade finance,
- a subsidiary of Société Générale will try to issue digital native corporate bonds.
Moreover, during the project presentation, the steering committee said that trials of commercial transactions in 11 sectors have already begun on the test platform.
As the total value of international trade transactions between the four project jurisdictions amounts to more than $730 billion, the mBridge steering committee has given priority to this specific use case.
mBridge is defined as a multi CBDC platform for international payments.
The fact is that with currencies that are natively digital, and based on centralized electronic ledgers that can be consulted remotely, it is finally possible to create automated procedures to carry out transactions that until now have often required human, if not manual, intervention. This has the potential to significantly reduce the cost and time of settling these operations, however complex.
According to the head of the Hong Kong Centre of the BIS Innovation Hub, Bénédicte Nolens, this project would be a “massive undertaking”, while HKMA executive director Colin revealed that building a new system based on CBDC would still be easier than trying to retrofit the existing infrastructure.
The Bank of Thailand’s brochure reveals that mBridge can reduce the timing of cross-border payments from several days to a few seconds, while also reducing costs.