When launched by the Bank for International Settlements’ (BIS) Innovation Hub, 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 joined last year) in 2021, Project mBridge promised to tackle some of the key inefficiencies in cross-border payments, making them immediate, cheap and universally accessible.
But not long after announcing the platform had achieved minimum viable product status in the middle of last year, the BIS said it was handing it over to the other partners.
In October, Bloomberg reported that the BIS had debated shutting down Project mBridge during meetings of the International Monetary Fund and World Bank after Vladimir Putin identified the underlying technology as a tool to circumvent sanctions and potentially undermine the dollar’s dominance in the global financial system.
The ability to make payments without using the correspondent banking system is appealing to countries looking to reduce their dependence on the US currency.
Herbert Poenisch, Senior Research Fellow at Zhejiang University and former Senior Economist at the BIS notes that Project mBridge’s ability to bypass western messaging systems means it is of particular interest to two members of BRICS+ – Russia and Iran – who are subject to western sanctions.
“The possibility exists that, via China and the UAE, Project mBridge technology and expertise could be ‘cloned’ and passed to Russia and Iran,” he says, adding that more information from the BIS and national central banks on ringfencing the platform would be a useful confidence-boosting measure.
In an interview at the Santander International Banking Conference 2024, Agustín Carstens, General Manager of the BIS said it was leaving the project not because it was a failure or because of political considerations but because it had been involved for four years and it was at a level where the partners could carry it on by themselves.
“At the same time, I have to say that Project mBridge is not mature enough to start operating – it is many years away from that,” he said.
Carstens addressed the geopolitical question, stressing that the platform was not created to cater to the needs of the BRICs but rather to satisfy broad central bank necessities.
“The BIS does not operate with any countries, nor can its products be used by any countries that are subject to sanctions,” he added. “This will continue to be the case and all central bank members are in this mindset that we need to be observant of sanctions and whatever products we put together should not be a conduit to violate sanctions.”
According to Manini Garg, a research assistant at the Centre for Economy and Growth at the Observer Research Foundation, Project mBridge promises to enhance economic sovereignty by giving countries more control over their financial transactions, mitigating the risk of sanctions or other forms of economic pressure.
“If Project mBridge is successful and gains widespread adoption, it could align with China’s long-term goal of increasing the global use of the RMB,” she says. “This would provide China with greater leverage in international economic policy and potentially reduce reliance on the US dollar for trade settlements.”
Josh Lipsky, Senior Director of the Atlantic Council’s GeoEconomics Center told Reuters in October that the BRICS debate showed payment systems have become a geopolitical issue.
“If there is even a possibility that Project mBridge could be helpful to those ambitions, the west wants no part of it,” he said. “But it is fair to ask what the consequences of this decision are. China will surely continue the work and now the Fed, which is a member of the BIS, will have even less visibility into the project.”
