- People’s Bank of China executive unveils China’s Digital Currency Bridge project that powers China’s Cross-Border Payments.
- The Multilateral Central Bank Digital Currency Bridge is a joint initiative by China, Hong Kong, Thailand, and the UAE
- Currency Bridge ensures secure transactions and uses a Byzantine Fault-Tolerant Algorithm to enhance protocol performance and efficiency
Mu Changchun, the director of the Digital Currency Research Institute of the People’s Bank of China, revealed key aspects of the technical and privacy architecture of the central bank’s digital currency bridge project at the China Hong Kong Technology Week Currency Bridge Symposium on November 2nd.
Despite the crypto ban in China, the country strives to adopt blockchain technology for seamless transactions. Mu Changchun stated that a dedicated technical system had been established for the Currency Bridge platform, with blockchain technology at its core called the Currency Bridge Blockchain (mBridge Ledger or mBL). This blockchain supports atomic payments, foreign exchange synchronized settlement, wallet management, privacy protection control, and more.
According to the source, in February 2021, the Digital Currency Research Institute of the People’s Bank of China collaborated with the Hong Kong Monetary Authority, the Central Bank of Thailand, and the Central Bank of the UAE to initiate a project called the Multilateral Central Bank Digital Currency Bridge. The project aimed to facilitate cross-border payments and foreign exchange settlement transactions.
From August to September 2022, 20 commercial banks from four countries and regions successfully completed the first real transaction pilot of the Currency Bridge project, with support from the Innovation Center of the Bank for International Settlements (Hong Kong). During this period, there were 164 cross-border payments and foreign exchange synchronized settlement transactions, with a settlement amount exceeding 150 million yuan. Digital yuan transactions accounted for 46.6%, and they mainly covered cross-border trade, cross-border remittances, and interbank transactions.
Mu Changchun emphasized that the Currency Bridge code is completely visible, auditable, and testable for all participating central banks/monetary authorities and is open source among participating central banks/monetary authorities. The underlying Currency Bridge blockchain uses a Byzantine fault-tolerant algorithm – DASH consensus, aiming to shorten the time required for consensus between nodes to improve the overall protocol performance and efficiency. Furthermore, regarding the privacy architecture design of the Currency Bridge, Mu Changchun stated,
The Currency Bridge platform achieves privacy control over core transaction data such as the identities of the payer and payee, transaction amounts, and invoked CBDC contracts. Through a pseudonymous mechanism implemented by randomly generated keys, the Currency Bridge platform ensures that only the parties involved in a single cross-border transaction and their respective central banks/monetary authorities can access transaction details.
Last year, China, Hong Kong, Thailand, and the United Arab Emirates’ monetary policy watchdogs all tested cross-border transfers using digital currencies they have created. The Bank for International Settlement (BIS) announced the successful conclusion of the first central bank digital currency CBDC) pilot on its LinkedIn page on September 27.