Improving the cross-border payment system, Mu Changchun explains the design of currency bridge technology in detail

Beijing Business Daily (Reporter Liu Sihong) On November 2nd, Mu Changchun from the Digital Currency Research Institute of the People's Bank of China attended the Hong Kong Science and Technology Week Currency Bridge Symposium, sharing some considerations on the technical architecture and privacy architecture design of the multilateral central bank digital currency bridge project.

We have built a technical system for the Currency Bridge platform, with the core being a blockchain specifically developed for the Currency Bridge: the Currency Bridge blockchain (mBridgeLedger or mBL). It is the core of the Currency Bridge technology architecture, supporting atomic payments and foreign exchange synchronous settlement services, money package management, and privacy protection control. "Mu Changchun introduced that the Currency Bridge code is fully visible to all participating central banks/currency authorities and can be audited, Testable and open source between central bank/monetary authority participants. The underlying currency bridge blockchain adopts a Byzantine fault-tolerant algorithm - the Great Sage Consensus, aimed at shortening the time required to reach consensus between nodes and improving overall protocol performance and efficiency.

Mu Changchun stated that the currency bridge blockchain is composed of nodes from participating central banks/currency authorities and commercial institutions. Each participant manages their own nodes, and all sensitive data such as transaction records and user certificates are stored at their respective nodes, protected through blockchain privacy management mechanisms.

Specifically, the nodes of the central bank/monetary authority serve as validation nodes in the blockchain consensus protocol; As a blockchain synchronization node, nodes of commercial institutions have the same functions as nodes of central banks/monetary authorities, except for not participating in consensus mechanisms.

In addition to currency bridge blockchain node management, the relevant systems of central banks/currency authorities and commercial institution participants also include currency bridge front-end and back-end modules. The front-end provides a user interaction interface, while the back-end performs business logic processing.

In addition, Mu Changchun introduced the privacy architecture design of Currency Bridge. The Currency Bridge platform implements privacy control over core transaction data such as the identities of the payer and payee, transaction amounts, and CBDC contracts invoked. Through a pseudonym mechanism implemented by randomly generated key pairs, the currency bridge platform ensures that for a single cross-border transaction, only the counterparty and corresponding central bank/currency authorities can understand the transaction details. For example, a commercial bank in the United Arab Emirates makes payments to a commercial bank in the Hong Kong Special Administrative Region using e-HKD on a currency bridge; The details of the transaction will only be viewed by the payer, payee, UAE Central Bank, and Hong Kong Monetary Authority. For the Bank of Thailand, the People's Bank of China Digital Currency Research Institute, and other participants, they cannot see any sensitive transaction information.

In order to address the challenges of high costs, low efficiency, low transparency, and insufficient coverage of traditional cross-border payments, as early as October 2020, the Group of Twenty (G20) proposed an initiative to improve cross-border payments and identified central bank digital currencies as one of the potential tools to enhance the cross-border payment system.

The Digital Currency Research Institute of the People's Bank of China, together with the Hong Kong Monetary Authority, the Bank of Thailand, and the Central Bank of the United Arab Emirates, jointly launched the Multilateral Central Bank Digital Currency Bridge (mBridge) project in February 2021. With the support and coordination of the Bank for International Settlements (Hong Kong) Innovation Center, the project aims to explore the application of central bank digital currencies in cross-border payments.

In 2021, the Currency Bridge project completed business model research, system development, and simulation testing, achieving 24-hour synchronous settlement of cross-border transactions. The Bank for International Settlements has released its first phase results report, affirming that the Currency Bridge platform has achieved leapfrog improvements compared to traditional agency banking models from the perspectives of cost savings and efficiency improvement.

From August to September 2022, 20 commercial banks from four countries and regions successfully completed the first international real transaction pilot of the Currency Bridge project. During this period, a total of 164 cross-border payment and foreign exchange synchronous settlement transactions occurred, with a settlement amount equivalent to over 150 million RMB. The number of digital RMB transactions accounted for 46.6%, mainly covering business scenarios such as cross-border trade, cross-border remittances, and interbank transactions.

In 2023, the Money Bridge Project Steering Committee will collaborate with all parties to study the overall strategic plan of the project and develop a roadmap, proposing to launch a Minimally Feasible Product (MVP), and gradually develop the Money Bridge project into an influential international cross-border payment infrastructure.