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China, Thailand, UAE team up to test cross-border crypto-payments
Just the sort of thing you’d do if you want your national cryptocurrency to be broadly accepted
China, Hong Kong, Thailand, and the United Arab Emirates have signed up to participate in a “Multiple Central Bank Digital Currency Bridge” (m-CBDC Bridge) to explore how they might conduct cross-border transactions using cryptocurrencies.
The People’s Bank of China, the nation’s central bank, characterised the Bridge as an experiment to find ways to make cross-border payments more efficient, cheaper, and more transparent. The Bridge extends a previous experiment conducted by China and the UAE.
“The participants of the project will evaluate the feasibility of m-CBDC Bridge application in cross-border capital transfer, international trade settlement and foreign exchange transactions, among others,” the People’s Bank said in its announcement.
Today, many such transactions are facilitated through the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
SWIFT is owned by financial institutions that use its services and sets standards for how the world moves money electronically. That’s a crucial role and SWIFT is generally appreciated for playing it.
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But the organisation has also had its controversies, such as allowing the USA to access transaction records to help trace terrorists’ sources of cash. The organisation has also faced allegations that the United States’ National Security Agency has found a way to monitor transactions it tends, and therefore snoop on all manner of financial activity around the world.
Does that sound like the kind of thing an ambitious Petrostate (the UAE), a Communist country (China) or a nation in which the democratically elected government knows it mustn’t upset the military (Thailand) might be interested in avoiding?
The People’s Bank hopes the experiment produces sufficiently interesting results that more central banks in Asia join future tests.
The advent of the bridge comes as China accelerates tests of its Digital Yuan, a national cryptocurrency that will make all transactions trackable within China. Recent Digital Yuan tests have seen it linked to big online payment platforms from Alibaba and Tencent, and even trialled in vending machines for train tickets in Shanghai. China hasn’t set a date for its wide introduction.
If the bridge works, and expands, China will therefore be well-positioned to have the Digital Yuan easily traded across borders. Just like the US dollar can be traded today.
China would love its currency to be as widely accepted as the greenback, which makes this effort to have the People’s Bank link up with its peers across Asia potentially a harbinger of wider change. ®