China, UAE's Central Bank Take on SWIFT With Global CBDC Payment Network
China and the UAE’s central bank have joined a cross-border payment network called the “multiple CBDC (m-CBDC) bridge.”
Powering Cross-Border CBDC Payments
The Digital Currency Institute (DCI) of the People’s Bank of China (PBC) and the Central Bank of the United Arab Emirates (CBUAE) have joined m-CBDC, a payment network incubated by the Bank for International Settlements (BIS) since 2019.
The Multiple CBDC (m-CBDC) Bridge is an international effort to promote central bank-issued digital currency payments. The initiative is spearheaded by the BIS Innovation Hub (BISIH), the Hong Kong Monetary Authority (HKMA), and the Bank of Thailand (BoT).
The project will develop a proof-of-concept to support real-time cross-border foreign exchange payment, international trade settlement, and capital market transactions.
Currently, Belgium-based SWIFT is the leading global network provider that facilitates payments between banks. SWIFT is largely overshadowed by U.S. dollar payments, accounting for more than a third of its transfers.
China launched the first CBDC globally and has been powering blockchain innovation in other municipal and political applications.
The country’s ambitions to disseminate its digital renminbi as the global reserve currency depends extensively on alternative payment networks’ success. China launched the Cross-Border Interbank Payment System (CIPS) in 2015 for direct renminbi transfers outside of SWIFT.
One of the advantages that DLT-based payment networks provide is their ability to offer a faster settlement between banks, along with the payment confirmation.
Disclosure: The author held Bitcoin at the time of press.