Agustín Carstens, the current General Manager at the Bank for International Settlements (BIS) has reaffirmed the recent declaration of the organization on its intention to withdraw from Project mBridge that aims to improve the existing cross-border payment systems with the use of wholesale central bank digital currencies (CBDCs). This decision within the context of the international monetary system becomes a significant turning point as it illustrates the innovative parenthood of the BIS over central banking innovations.
Project mBridge: Constructed In Brief
Project mBridge was borne over four years with several banks with the aim of easing international payments. With the growing interest in CDBCs, the project aimed to address the challenges associated with cross-border payments which are improved in speed and security but low in cost as well as the expensive and slow processing of such payments.
The Announcement
In a speech dated 31 October Carstens expounded that the pulling out from mBridge project was made not because of failure or politics but rather the phase of the project maturity. He made an analogy of this development as ‘graduation indicating that the member central banks of the project had in fact developed to a level where they were able to undertake the project without external lash supporting them.
‘We have been involved for four years, and the project has grown old enough for the partners to pursue the project on their own,’’ Carstens said indicating the stage where departitioned engagement of the platform will be appropriate for progress although it is progressive within the context of the activities of the BIS.
Addressing Issues
When asked if the mBridge network could aid the BRICS countries in bypassing sanctions, Carstens firmly rejected the suggestion. In his words, the aim of this particular project was not such and that the operational capabilities were not advanced enough to warrant such use.
“mBridge is not the ‘BRICS bridge,’” Carstens clarified, reaffirming the BIS’s commitment to upholding international sanctions across its initiatives.
A Vision for the Future
Carstens expanded on the vision of finance that the BIS envisions in the future, particularly the idea of the ‘Finternet’ – an interconnected financial infrastructure aimed at improving access and cutting down on overheads. He outlined three foundational pillars of the Finternet.
- Robust Economic and Financial Architecture: Provision for sound building blocks of the financial infrastructure.
- Advanced Technology: Employing high-end solutions for enabling financial services.
- Sound Legal and Regulatory Framework: Providing a clear guidance for development and management of such systems without inhibiting their growth. The objective of the BIS, through digital transformation, is to make all financial transactions easier, through the use of a tokenized asset system, and programmable money.
Innovation Hub Initiatives
In addition, Carstens pointed out yet another impressive undertaking, Project Agorá, which brings about the unification of the two types of digital money, central bank digital currency (CBDC) and commecial bank money on a single ledger. This is in line with the philosophy of the BIS that while technology is important, it should fit into other aspects which are necessary in order to eliminate the challenges posed by cross-border payments in the interaction between public and private sectors.
Conclusion
The fact that the BIS is no longer a member of Project mBridge can be seen as both growing up of the project and a proposition of the era who’s financial systems go beyond borders, are efficient and compliant with international standards for finance. The changing landscape of finance, as noted by Carstens, requires close collaboration between central banks and commercial entities in order to leverage technological developments as well as transform the financial system’s design in line with the requirements of the digital economy.