BiJie.com reported:
The exploration progress of the multilateral central bank digital currency bridge project has attracted widespread attention in the market.
“In recent months, the volume of currency bridge transactions has been steadily increasing, which proves the market institutions’ confidence in the platform,” revealed Liu Lei, Vice President of the People’s Bank of China, on October 23, regarding the latest progress of the project after entering the minimum viable product stage.
At the 2024 Financial Street Forum series event, the “Multilateral Central Bank Digital Currency Bridge: Central Bank Digital Currency Connecting the Global Economy” seminar, Liu Lei introduced that the currency bridge project is focusing on solving the difficulties and pain points of cross-border payments, attracting the attention of many participants.
What is a currency bridge? Simply put, it is a bridge built by multiple central banks using central bank digital currencies to form a cross-border payment network. Each payment transaction can be conducted in an orderly manner through the “bridge,” achieving faster, lower-cost, and safer cross-border payment and settlement, benefiting all parties involved.
In February 2021, the multilateral central bank digital currency bridge project was jointly launched by the Innovation Center of the Bank for International Settlements (Hong Kong), the Central Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Research Institute of the People’s Bank of China, and the Hong Kong Monetary Authority. Its aim is to explore the application of central bank digital currencies in cross-border payments.
After more than three years of development, the multilateral central bank digital currency bridge project entered the minimum viable product stage in June this year. This means that participating institutions in the currency bridge can conduct real transactions in an orderly manner based on actual conditions. At the same time, the project has further expanded its membership, with the Saudi Arabian Monetary Authority officially joining the currency bridge.
“The demand side is the driving force behind the development of the currency bridge project,” said Zhou Xiaochuan, Vice Chairman of the Boao Forum for Asia, at the seminar. The interconnection and rapid development of Asian economies have prompted the launch and gradual implementation of the multilateral central bank digital currency bridge project.
In Liu Lei’s view, during the execution of the currency bridge project, all parties have always adhered to the three principles of “no loss,” “compliance,” and “interconnectivity.”
To achieve the benign evolution of the international monetary system, the most effective method is to achieve interconnection between various cross-border payment systems.
Liu Lei stated that the currency bridge can not only support the interconnection of central bank digital currency systems but also support the connection with traditional central bank payment systems. At the same time, the currency bridge achieves convenient synchronous settlement through central bank currencies, achieving interconnectivity at the currency level.
Currently, the multilateral central bank digital currency bridge project is focusing on exploring solutions to the difficulties and pain points in cross-border payments, and its advantages are gradually becoming apparent.
Small-scale cross-border payment businesses such as cross-border e-commerce and remittances are often overlooked by commercial banks due to factors such as complex participants, long business chains, and high identity verification costs.
“The currency bridge should consider these business areas that are closer to people’s livelihoods, solve market pain points, and complement the international monetary and trading system,” said Liu Lei.
In order to solve the problems of low efficiency and high costs in cross-border payments, the currency bridge is actively exploring.
Statistics released by the Bank for International Settlements show that the currency bridge platform can complete a payment transaction in 6 to 9 seconds, while cross-border transactions processed through correspondent banks currently have a delay of 2 to 5 days between payment and settlement. At the same time, using the currency bridge to complete cross-border payment transactions can save nearly half of the costs.
Currently, the currency bridge project has entered a new stage and is facing new challenges such as data storage and network stability. How to further enhance the performance of the currency bridge system?
At the seminar, Mu Changchun, Director of the Digital Currency Research Institute of the People’s Bank of China, introduced three plans:
First, strengthen privacy protection design. The plan is to launch relevant privacy protection technologies in 2025, proving the compliance and sufficiency of funds of transaction parties without disclosing details such as account balances and transaction timestamps, ensuring the efficiency of the entire system.
Second, improve the development and operation system of the system. The currency bridge system is deployed in a decentralized manner, with each party independently operating it. However, as the currency bridge system is a cross-border financial market infrastructure that operates on a regular basis, it requires an efficient development and operation mechanism to ensure the continuity of system business.
Third, enhance the openness and transparency of the currency bridge platform. The plan is to use the development and operation system to promote joint development, code delivery, etc. (Reporters Wu Yu and Ren Jun)
