CBUAE issues communique on its joint ‘mBridge’ project

The Central Bank of the UAE (CBUAE) has issued a communiqué on its joint “mBridge” project with partners from the Bank for International Settlements (BIS), Innovation Hub Centre in Hong Kong, the Hong Kong Monetary Authority (HKMA), the Bank of Thailand (BoT), and the Digital Currency Institute of the People’s Bank of China (PBoC).

Entitled ‘Building a multi CBDC platform for international payments, the communiqué outlines the latest progress of the mBridge project, which seeks to speed up cross-border fund transfers and international trade settlement transfers between participating banks using central bank digital currencies (CBDC).

The project has now identified and will start to put through, business test cases based on historical transactions to test the recently-developed mBridge Trial Platform. In addition, a roadmap for the mBridge project’s target achievements in 2022 has been established, using an iterative and agile process to develop a minimally viable product that could support the full process of international trade settlement and other use cases.

Twenty-two project participants from all four jurisdictions identified fifteen possible business test cases to assess the mBridge Trial Platform’s ability to enhance real-world cross-border payments. The identified business test cases cover transactions across eleven industries (amounting to Dhs1 billion) to be tested on the mBridge Trial Platform.

Five banks located in the UAE took part, including First Abu Dhabi Bank, Emirates NBD, Dubai Islamic Bank, HSBC, and Standard Chartered Bank, in some of these fifteen cases. International trade settlement was prioritised in the identified business test cases given the high volume of trade between the four jurisdictions, amounting to $731 billion.

Khaled Mohamed Balama, Governor of the CBUAE, commented, “The mBridge project is a landmark development in the field of central bank digital currencies, and one that we at the CBUAE are determined to jointly explore and develop with BIS and other central banking partners, as we look to deliver better, faster, safer and more cost-effective means of international fund transfers. This communique outlines the ambitious roadmap which the CBUAE and its fellow central banking partners have set out for the mBridge Trial Platform journey, underpinned by an iterative development approach.

“I extend my thanks to our participating UAE banks for their contribution and provision of business test cases, which were instrumental to the robust progress towards the project’s objectives.”

Since February 2021, the CBUAE has worked with its global central banking partners on the mBridge project to deliver a proof-of-concept product on the use of CBDCs for international fund transfers based on distributed ledger technology (DLT - also known as blockchain).

The project aims to create more efficient and innovative CBDC infrastructure to reduce obstacles to cross-border payments, including high costs, lack of transparency, low efficiency and other operational complexities. The CBUAE had previously conducted a similar CBDC experiment with its Saudi Arabian partner (SAMA), named Project Aber.

Meanwhile the Central Bank of the UAE (CBUAE) and the Central Bank of the Republic of Indonesia (Bank Indonesia) have signed a Memorandum of Understanding (MoU)to boost mutual co-operation. The bilateral MoU includes three main areas, covering digital innovation in payment and financial services to facilitate more efficient and secure transactions, cross-border payment systems including retail payments, and frameworks of anti-money laundering and combatting the financing of terrorism.

The MoU focused on enhancing bilateral cooperation in the areas of payment systems and digital financial innovation, including conventional and Islamic finance based on trust, mutual understanding and the principle of reciprocity. It supports joint initiatives to examine cross-border payment systems and encourages the development of new FinTech companies and structures in both countries.

Khaled Mohamed Balama, Governor of the CBUAE and Perry Warjiyo, Governor of Bank Indonesia signed the MoU, the exchange of which was in the presence of His Highness Shaikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, and Joko Widodo, President of the Republic of Indonesia.

The CBUAE and Bank Indonesia will also exchange relevant information and views on issues of concern or common interest under the MoU, based on applicable laws and regulations in each jurisdiction and other considerations that may be relevant. Balama said, “The signing of this MoU with our esteemed central bank counterparts in Indonesia reflects the CBUAE’s strategy of developing the most efficient payment systems, and working with partners to enforce global regulations to enhance confidence in the UAE financial market. It also demonstrates the clear objective of bringing together like minds to find new financial solutions and to strengthen the joint efforts against illicit financial activity.”

WAM