BIS Considers Ending Mbridge Project, BRICS Countries Could Use It for Circumventing Sanctions

The Bank for International Settlements (BIS) is considering what to do with Mbridge, one of its high-level digitized settlement projects involving central bank digital currencies (CBDCs).

The Bank for International Settlements (BIS) is considering ending its Mbridge project, a digitized settlement system that could be used by BRICS countries to circumvent current sanctions, according to reports.

The project, which is still in its early stages, has been designed to allow international settlements away from the standard financial system. However, its possible usage by BRICS countries to sidestep current sanctions has raised concerns among some parties.

The Mbridge project, which is being overseen by the BIS Innovation Hub, currently includes the participation of the UAE, China, Hong Kong, Thailand, Saudi Arabia, and the central bank of Singapore.

The system is designed to facilitate cross-border payments and settlements using multiple central bank digital currencies (CBDCs), with the aim of reducing costs, increasing efficiency, and enhancing transparency in international transactions.

However, the involvement of the People’s Bank of China (PBOC) in the project has raised concerns, given the potential for the digital yuan to be used by Russia to benefit from the system, despite being subject to sanctions.

Reports indicate that the BIS is considering a resolution to terminate the Mbridge project, which could be influenced by the recent embrace of cryptocurrency in the BRICS bloc.

During the World Bank and International Monetary Fund (IMF) meetings in Washington, several high-level authorities from BRICS countries acknowledged the relevance of digital assets in building an alternative payment system, highlighting the potential role of CBDCs and cryptocurrencies in this endeavor.

If taken, the decision to shut down the Mbridge project would not affect its progress, as the system has already reached the minimum viable product (MVP) stages. This means that the basic functionality is already there.

In February, the UAE conducted one of the first settlements using Mbridge and its digital dirham CBDC, sending 50 million digital dirhams ($13.6 million) directly to China.

These concerns are not new. American and European observers communicated similar observations in August 2023 due to the project’s sanctions-circumventing possibilities.