New business opportunities in Hong Kong with mBridge e-currency project
A multi-country central bank digital currency (CBDC) project involving mainland China, Hong Kong, Thailand, and the United Arab Emirates has achieved a significant milestone by launching its minimum viable product (MVP) platform.
This platform will serve as a testing ground for various use cases in cross-border transactions.
As Project mBridge enters the MVP stage, the involvement of both the public and private sectors will increase. The Saudi Central Bank has joined as a full participant in the project, which now includes more than 26 observing members.
Since the project’s inception in 2021, the four founding monetary authorities and the Bank for International Settlements (BIS) Innovation Hub have collaborated to use digital currencies built on distributed ledger technology (DLT) to facilitate instant cross-border payments and settlements.
The MVP platform, based on a new blockchain called mBridge ledger, will act as a “test bed for add-on technology solutions, new use cases, and interoperability with other platforms,” according to press releases from the BIS and the Hong Kong Monetary Authority.
The new platform is compatible with the Ethereum blockchain, one of the largest distributed ledgers globally. Ethereum hosts ether, the second-largest cryptocurrency by market capitalization after bitcoin, and is renowned for creating programmable smart contracts that enable various product types.
Private sector firms are also invited to propose solutions and use cases to further develop the platform.
During a pilot phase in 2022, 20 banks from the four jurisdictions used the mBridge platform to conduct and settle 164 payment and foreign exchange transactions, totaling more than US$22 million over six weeks.
Five commercial banks in Hong Kong have been onboarded to the platform: Bank of China, Bank of Communications Hong Kong, HSBC, Industrial and Commercial Bank of China, and Standard Chartered Bank.
Governance and legal frameworks, including a rule book, have been formulated to match the decentralized nature of the platform.
The mBridge project aligns with Hong Kong’s other CBDC initiatives, which aim to promote the city as a hub for virtual assets and financial technology.
In March 2024, the HKMA launched a “wCBDC” pilot to improve interbank wholesale settlements using tokenized money, a stablecoin sandbox to allow companies to trial cryptocurrency tokens pegged to fiat currency in the city, and the second phase of its retail e-HKD pilot.
Hong Kong’s active participation in these projects demonstrates its commitment to staying at the forefront of financial technology. The development of the mBridge and e-HKD projects with tokenized money exemplifies Hong Kong’s effort to remain contemporary, fostering closer connections between domestic and global businesses and enhancing the reliability, transparency, and stability of their operations.