Multilateral CBDC Bridge: A New Engine for Global Cross-border Payments

Multilateral CBDC Bridge: A New Engine for Global Cross-border PaymentsThe exploration of the Multilateral Central Bank Digital Currency Bridge project (hereinafter referred to as "the Currency Bridge") is receiving significant market attention. On October 23, Lu Lei, Deputy Governor of the People's Bank of China, revealed at the "Multilateral CBDC Bridge: Connecting Global Economies with Central Bank Digital Currencies" symposium that the Currency Bridge project has entered the Minimum Viable Product phase and is actively exploring solutions for pain points in cross-border payments

Multilateral CBDC Bridge: A New Engine for Global Cross-border Payments

The exploration of the Multilateral Central Bank Digital Currency Bridge project (hereinafter referred to as "the Currency Bridge") is receiving significant market attention. On October 23, Lu Lei, Deputy Governor of the People's Bank of China, revealed at the "Multilateral CBDC Bridge: Connecting Global Economies with Central Bank Digital Currencies" symposium that the Currency Bridge project has entered the Minimum Viable Product phase and is actively exploring solutions for pain points in cross-border payments.

What is the Currency Bridge?

Simply put, the Currency Bridge is a bridge built by multiple central banks using central bank digital currencies to form a cross-border payment network. Through this "bridge," payment transactions can be conducted faster, at lower costs, and more securely, benefiting all participating parties.

Development History and Objectives

In February 2021, the Currency Bridge project was jointly launched by the Innovation Hub of the Bank for International Settlements (Hong Kong), the Bank of Thailand, the Central Bank of the UAE, the Digital Currency Institute of the People's Bank of China, and the Hong Kong Monetary Authority, aiming to explore the application of central bank digital currencies in cross-border payments.

After more than three years of development, the project entered the Minimum Viable Product phase in June this year, indicating that participating institutions can conduct real transactions in accordance with actual needs. Meanwhile, the Central Bank of Saudi Arabia has also officially joined the Currency Bridge project.

Three Principles and Advantages

Lu Lei emphasized that the Currency Bridge project adheres to the three principles of "lossless," "compliant," and "interoperable" during its execution. It can support the interconnection of central bank digital currency systems and also connect with traditional central bank payment systems, facilitating convenient synchronous settlement and clearing through central bank currencies.

The advantages of the Currency Bridge are gradually emerging:

• Enhanced efficiency: Statistics from the Bank for International Settlements show that the Currency Bridge platform can process a payment transaction in 6 to 9 seconds, while traditional correspondent bank cross-border transactions require a delay of 2 to 5 days.

• Reduced costs: Using the Currency Bridge to complete cross-border payment transactions can save nearly half the cost.

• Meeting demand: The Currency Bridge can address pain points in small-value cross-border payment businesses such as cross-border e-commerce and remittances, which are often overlooked by commercial banks due to complex participating entities, long business chains, and high identity verification costs.

Challenges and Future Prospects

Although the Currency Bridge project has entered a new phase, it faces new challenges such as data storage and network stability. To further enhance system performance, Mu Changchun, Director of the Digital Currency Institute of the People's Bank of China, has proposed three plans:

• Strengthening privacy protection: It plans to launch related privacy protection technologies in 2025, ensuring the compliance of both parties to the transaction and the sufficiency of funds without disclosing details like account balances and transaction timestamps, to enhance system operating efficiency.

• Improving development and operations: The Currency Bridge system is deployed in a decentralized manner, requiring an efficient development and operations mechanism to ensure system business continuity.

• Enhancing openness and transparency: Utilizing the development and operations system to promote joint development, code delivery, and other practices to further improve the openness and transparency of the platform.

Conclusion

The Multilateral Central Bank Digital Currency Bridge project is actively exploring solutions for the low efficiency and high costs in cross-border payments. As a new engine for global cross-border payments, its future development is worth looking forward to. With continuous technological advancements and deepening cooperation among various parties, the Currency Bridge is expected to bring new vitality to the international monetary and trade system, driving the process of global economic integration.