Mu Changchun from the Data Research Institute of the Central Bank: Monetary Bridge Achieves Privacy Control over Core Transaction Data

On November 2nd, at the Hong Kong Science and Technology Week Currency Bridge Symposium, Mu Changchun, Director of the Digital Currency Research Institute of the People's Bank of China, stated when discussing the privacy architecture design of the Central Bank's Digital Currency Bridge (hereinafter referred to as "Currency Bridge") project that the Currency Bridge platform has implemented privacy control over core transaction data such as the identities of payers and payees, 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 uses e-HKD to make payments to a commercial bank in the Hong Kong Special Administrative Region of China on a currency bridge. The transaction details will only be viewed by the payer, payee, the UAE Central Bank, and the 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 addition, he also introduced some considerations for the technical architecture of the Currency Bridge project. He stated that we have built a technical system for the currency bridge platform, with a core blockchain specifically developed for currency bridges: the currency bridge blockchain (mBridgeLedger or mBL). It is the core of the currency bridge technology architecture, supporting atomized payment and foreign exchange synchronous settlement business, wallet management, and privacy protection control. The currency bridge code is fully visible, auditable, testable, and open source among all participating central banks/monetary authorities. The underlying currency bridge blockchain adopts a Byzantine fault-tolerant algorithm, the Great Saint Consensus, aimed at shortening the time required for reaching 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 order to address the challenges of high costs, low efficiency, low transparency, and insufficient coverage of traditional cross-border payments, in 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 project in February 2021, with the support and coordination of the Bank for International Settlements (Hong Kong) Innovation Center, to explore the application of central bank digital currency 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.