Market News

 by Ritika Sharma

• Central banks of several Asian economies have signed a pact to create a new unified blockchain-based payments interface.
• The project is designed to be ubiquitous as a new digital currency can be used across borders.
• It is an Asian solution to the rising popularity of Bitcoin and cryptocurrency in general.

Asia may finally introduce a new currency that can be used worldwide, just like the Euro in Europe, albeit a more sophisticated and virtual version. Currently, this is a joint venture among four countries in Asia, but more countries are expected to follow suit.

Tackling pain points:

Fiat currencies, though widely used, face red tape in the form of inefficiencies, cross border regulatory mechanisms and high cost. To facilitate easier transfers and maybe use it as a mainstream form of legal tender, the Hong Kong Monetary Authority and the central banks of Thailand, China, and the United Arab Emirates have joined hands. In a press release, the HKMA announced the introduction of the multiple Central Bank Digital Currency Bridge (m-CBDC Bridge) project.

Prototype Distributed Ledger Technology:

The m-CBDC project aims to utilize blockchain, a distributed ledger technology, to improve the financial infrastructure’s stability for intra and inter-country payments. Several countries are already in the process of bringing blockchain-based finance to the mainstream economy. India is in the process of bringing about a law to regulate cryptocurrency while also advancing the prospect of introducing its native digital currency. China is ahead of the competition, and it is currently testing prototype biometric hardware wallets to enable storage of its native digital yuan.

Earlier attempts

The m-CBDC Bridge project is reported to be built upon the Inathon-LionRock project’s findings in Jan 2020. Under the project, the participating banks of Hong Kong and Thailand used a cross-border corridor network to implement transactions in an anatomic and peer-to-peer manner while leveraging the benefits that smart contracts offered. The network was monitored closely, and data about several parameters were collected, including token conversion, forex execution, liquidity management and cross-border regulatory compliance. The published report stated that the state of the prototype network parameters was extremely satisfactory. The new m-CBDC Bridge project, also dubbed as the second phase of the Inathon-LionRock, includes two more nations with a greater number of participating banks and higher constraints concerning efficiency, costs and cross border regulation.Once implemented, conducting fund transfers and international remittances via this platform promises to be a breeze.