The Central Bank of the United Arab Emirates (CBUAE) has announced the completion of “the world’s largest pilot” of central bank digital currencies (CBDCs) in collaboration with the central banks of four countries.
According to a Reuters report, the multinational CBDC pilot was part of Project mBridge, which saw the participation of central banks from Thailand, Hong Kong, and China. Over 20 commercial banks from the collaborating countries took part in the pilot, with the six-week experiment recording over $21 million transactions.
“The project mBridge demonstrated faster, cost-effective and secure cross-border monetary settlements using central bank money, identified as a G20 economic priority,” said the CBUAE in a statement.
Apart from improving cross-border payments, Khaled Mohamed Balama, CBUAE’s governor, noted that the pilot was also targeted at enhancing the local financial sector in the country. His statement indicated that the move will “support UAE competitiveness, diversity and growth of the financial sector in line with future economic trends.”
While working on the potential launch of a cross-border CBDC, the UAE is also juggling with virtual currency and hopes to transform itself into the leading hub for the asset class. Last week, the government noted that it was in talks with several digital asset firms to potentially set up their operations in the country.
Regional governments in the UAE are not leaving all the work to the central government, with the Emirate of Dubai attracting global industry firms like Binance and Crypto.com. Dubai has also made a strong play for the metaverse by announcing that it was targeting 40,000 jobs in the metaverse by 2030, while the UAE opened a branch of the Ministry of Economy in the metaverse.
mCBDC project poised to change the entire landscape
The mCBDC project was put together by the Bank for International Settlements (BIS) Innovation Hub in Hong Kong. An official report highlights the potential it has for the future of CBDCs. The report noted the rationale for cross-border CBDCs, noting that the frictions involved could cost users up to $120 billion in transaction fees annually and that “emerging markets tend to bear the brunt of the friction.”
“The solution uses a custom shared permissioned blockchain, which it boasts was developed by central banks for central banks,” reads the report.
Privacy concerns over the use of the mCBDCs were whittled down over the permissioned nature of the decentralized ledger, allowing participating commercial banks to view their own transactions. The report added that zero-knowledge proof is being considered as an added security layer to improve privacy.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: The BSV Global Blockchain Convention presentation, CBDCs and BSV
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