The central banks of the United Arab Emirates and China will participate in a global campaign that seeks to use blockchain tech for regional payments, according to an announcement by the Bank of Thailand and the Hong Kong Monetary Authority.
Dubbed as the “Multiple Central Bank Digital Currency Bridge” (m-CBDC), the project will study the capabilities of distributed ledger technology (DLT) through the establishment of a proof-of-concept (PoC) prototype, a joint statement on Tuesday said.
Central bank digital currencies are like banknotes or coins and provide holders a direct claim on the central bank, potentially giving a boost to commercial finance institutions and banks.
Powerhouse China’s own CBDC
China’s central bank, the People’s Bank of China, has its own local CBDC program called the e-CNY, in which real-life tests were carried out in multiple key urban locations. E-CNY is one of the most advanced initiatives of its kind in the globe today.
Relatively, a senior executive at the Bank of Thailand has confirmed that BOT is already using a central bank digital currency for transactions with some private and government enterprises.
BOT assistant governor Vachira Arromdee told journalists on Wednesday that the central bank considered broadening the use of the cryptocurrency among major companies, CoinDesk said, citing The Nation report.
Thailand and Hong Kong previously worked on Project-Inthanon-Lionrock in the fourth quarter of 2019. The initiative developed a DLT-based prototype that enabled participating banks to process payment transactions on a peer-to-peer (P2P) basis, eliminating clearing and settlement trouble points.
M-CBDC Bridge to reach more central banks
Market analysts around the world are keeping an eye on China’s e-CNY campaign, interested in both the information they can learn and whether and how its central bank tries to employ it to internationalize its currency, the yuan, a longstanding goal of China’s financial regulators.
For Thailand’s part, CBDC is supported by the central bank’s currency reserves. Based on figures by BOT, its foreign currency reserves have increased by more than $25 billion over the last four quarters.
Now that China and the UAE are involved in the project, it will further “foster a conducive environment” for other central banks to participate, according to PYMNTS.
Under its new name, the m-CBDC Bridge will reach more central banks, which will examine its feasibility on a pan-Asian and eventually more expansive basis.
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