Last month, the Chief Executive of the Hong Kong Monetary Authority, Eddie Yue, visited the United Arab Emirates for cooperation talks with the local central bank and banks. Yue said in an interview that the cross-border network for various central bank digital currencies, mBridge, is expected to enter the "minimum viable product (MVP)" stage early next year. Currently, besides the central banks of mainland China, Hong Kong, Thailand, and the United Arab Emirates, two other central banks are in talks to join, and more are expected to join before the MVP stage.
Yue pointed out that the purpose of this discussion is to solve some problems and hope to push mBridge into the MVP stage, making trade settlement more affordable and efficient. He believes that the current difficulties are not mainly technical issues but problems with coordinating regulatory requirements, platform governance methods, ensuring the liquidity of local and foreign currencies, and other aspects.
Regarding regulation, Yue explained that it would be very difficult to reflect the regulatory requirements of different regions without harmonization, including anti-money laundering (AML) or capital control regulations. The advantage of mBridge is that it can reduce cross-border remittance time to several seconds, instead of waiting for 3 to 5 days. However, if each bank has to follow its own AML rules, the whole process will become very slow.
Liquidity is another problem. Yue proposed some solutions, such as whether it is possible to provide liquidity support through on-chain banks if there is a lack of Hong Kong Monetary Authority's digital currency (CBDC), whether the central bank can provide liquidity support, how to collect collateral, and how to ensure that banks have sufficient foreign exchange liquidity to avoid excessive bid-ask spreads.
Yue hopes that the platform can make cross-border trade settlement more affordable and efficient, eliminating any obstacles that may cause transactions to slow down or become expensive. He also said that besides the four central banks, mBridge has 15 central banks or international organizations as observer members, of which two are in talks to join, and specific details will be announced later.
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Policy and Regulation
