BRICS CBDC Payments System Reaches Minimal Viable Product Stage
While many be somewhat aware that China, Russia and other BRICS nations are supposedly trying to create an alternative petrocurrency to the US Dollar, like me, they not have much clue as to how this may play out. Well, as it turns out, it isn’t the emergence of a new currency backed by Gold that all of this turns on but a payment system called mBridge. mBridge reached minimal viable product stage in early June apparently. mBridge is the result of extensive collaboration starting in 2021 between the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People’s Bank of China and the Hong Kong Monetary Authority. The Saudi Central Bank has also recently joined mBridge as a full participant. There are now more than 26 observing members that may join as the project moves forward. But what is mBridge?
mBridge is a payment system created ostensibly to address financial inclusion concerns by the BRICS.. It aims to address some of the key inefficiencies in cross-border payments, including high costs, low speed and operational complexities, according to BIS, that states that “multi-CBDC arrangements that connect different jurisdictions in a single common technical infrastructure offer significant potential to improve the current system and allow cross-border payments to be immediate, cheap and universally accessible with final settlement.”
Hidden in that statement are a number of things that really do potentially threaten the US Dollar as the international currency of choice. You see, the US Dollar gets some of its value by being a ‘bridging currency‘. According to cryptonews, “a world bridge currency is the term used to describe a digital or FIAT currency that serves as a medium when different nations or institutions are making financial transactions. For example, Saudi Arabia whose national currency is the Riyal will use the U.S. Dollar when selling oil to foreign countries like China. The purpose of a bridge currency is to facilitate seamless transactions across different ecosystems with minimum bottlenecks. It acts as a global connector, reducing the friction and inefficiencies associated with cross-border trade and finance.” So, by eliminating the USD as a bridge currency in transactions between BRICS countries, the USD will start to lose value and lose its status at the same time. It turns out that the new BRICS currency is more likely to be a CBDC version of the Chinese Huan, which may be used as the bridge currency in the mBridge system.
As a recent Business Insider article stated, “if such payment ecosystems make ground, it’s a real threat to US Treasury liquidity, risking a key pillar of the greenback’s international position, Tran said. “In such a world, the dollar would remain prominent but without its outsized clout, complemented by currencies such as the Chinese renminbi, the euro, and the Japanese yen in a way that’s commensurate with the international footprint of their economies,” he said. Tran concluded: “In this context, how Saudi Arabia approaches the petrodollar remains an important harbinger of the financial future to come as its creation was fifty years prior.“
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