BIS cuts ties with controversial CBDC project mBridge, citing project maturity BIS cuts ties with controversial CBDC project mBridge, citing project maturity
The project, designed to simplify cross-border payments through CBDCs, has raised concerns over potential misuse to evade US sanctions.
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Updated: Nov. 1, 2024 at 6:26 pm UTC
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The Bank for International Settlements (BIS) announced its departure from Project mBridge, a central bank digital currency (CBDC) initiative developed in partnership with the People’s Bank of China and the central banks of Hong Kong, Thailand, Saudi Arabia, and the UAE.
The project, designed to simplify cross-border payments through CBDCs, has raised concerns over potential misuse by certain nations to evade international sanctions, according to a recent Bloomberg News report.
BIS General Manager Agustín Carstens confirmed the organization’s withdrawal in an Oct. 31 speech, emphasizing that the decision to leave was not politically driven.
Carstens characterized the exit as a “graduation” for the project, indicating that Project mBridge had reached a level of maturity where the BIS’ involvement was no longer essential.
He said:
“We have contributed four years to this effort, and it has matured to the point where our partners can sustain it independently.”
Carstens added that the BIS often steps back from initiatives once they achieve operational stability. However, recent political developments have added layers of complexity to the BIS’s departure.
Concerns about sanctions
In an address last month, Russian President Vladimir Putin mentioned Project mBridge’s underlying technology as a potential tool to circumvent Western financial sanctions, raising global concerns over the platform’s usage.
While Putin’s remarks didn’t specify intentions, they fueled speculation that mBridge could serve as a pathway for BRICS nations to bypass dollar-based restrictions in international trade.
The BIS, a global organization fostering international monetary and financial cooperation, remains dedicated to compliance with international standards and has sought to distance itself from any association with sanction violations.
Addressing the speculation, Carstens clarified that Project mBridge was not intended as a “BRICS bridge” or a tool to undermine global sanctions. He explained that the platform is still in its development stages and was built to streamline payment processes rather than to challenge existing financial structures.
He further stated that although mBridge has developed to a point where the BIS can step back, it remains “many years away” from operational readiness.
‘Finternet’
Despite concluding its involvement in mBridge, the BIS continues to pursue broader digital finance initiatives, including its vision for a “Finternet.” This conceptual framework seeks to create an interconnected global financial system with improved accessibility, reduced transaction costs, and increased regulatory alignment.
Carstens described the Finternet as resting on three main pillars: robust financial architecture, advanced technology, and solid regulatory foundations. The goal is to use tokenized assets and programmable money to automate and streamline transactions, providing a resilient infrastructure in an increasingly digital financial world.
The BIS is also advancing Project Agorá through its Innovation Hub. This initiative aims to integrate tokenized central bank and commercial bank money on unified ledgers, which could address inefficiencies in cross-border payments.
By focusing on interoperability and regulatory cohesion, Project Agorá highlights the BIS’ belief that while technology is critical, sustainable reform in global finance requires a foundational structure aligning public and private sector goals.
Carstens reiterated the BIS’ commitment to fostering compliance and security in its projects. While the BIS continues to support innovative financial tools, Carstens noted that the true future of finance is about reshaping systems to meet the needs of a digital-first world where central and commercial banks collaborate to provide accessible and secure financial solutions.
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Assad Jafri
AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.
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Bank for International Settlements
Bank for International Settlements (BIS) is an international financial institution, whose headquarter is in Basel, Switzerland, with representative offices in Hong Kong SAR and Mexico City.