Search on TFTC
BIS Distances Itself from Project mBridge Amid Sanctions Concerns

BIS Distances Itself from Project mBridge Amid Sanctions Concerns

Oct 31, 2024
CBDCs

BIS Distances Itself from Project mBridge Amid Sanctions Concerns

The Bank for International Settlements (BIS) has announced its decision to step back from Project mBridge, a cross-border payments initiative focused on central bank digital currencies (CBDCs), as speculation arises regarding its potential use to circumvent international sanctions. BIS General Manager Agustín Carstens confirmed the organization’s exit from the project during the Santander International Banking Conference on October 31, citing that the BIS had been involved since the project’s inception in 2021 and had completed its contribution.

Reuters

Project mBridge, a collaboration between BIS and the central banks of China, Hong Kong, Thailand, and the United Arab Emirates, was joined by Saudi Arabia earlier this year. Carstens explained that the decision to exit Project mBridge was not influenced by political concerns but rather by BIS’s view that the project had reached a developmental stage where the partner banks could independently advance it. “The BIS is leaving that project not because it was a failure or not because of political considerations but mostly because we have been involved for four years, and it is at a level where the partners can carry it on by themselves,” Carstens stated.

Project mBridge, which has achieved a “minimum viable product” stage, was designed to streamline cross-border CBDC transactions without relying on the traditional correspondent banking system, which is a key mechanism for enforcing economic sanctions. This independence from correspondent banking has led to questions about whether the platform could enable countries under sanctions to bypass such restrictions. Carstens addressed these concerns directly, saying, “mBridge is not the BRICS bridge and I have to say that categorically. mBridge was not created to cater to the needs of BRICS.” The BRICS alliance includes Brazil, Russia, India, China, and South Africa, along with recent additions Iran, Egypt, Ethiopia, Saudi Arabia, and the UAE, sparking speculation about their interest in alternatives to the U.S. dollar-dominated financial system.

Carstens emphasized that BIS adheres strictly to sanctions requirements, stating, “We need to be observant of sanctions, and whatever products we put together should not be a conduit to violate any of these sanctions.” He clarified that BIS has never conducted business with sanctioned entities and underscored that this policy will remain in effect.

Instead, Carstens pointed to Project Agora, another BIS initiative focused on creating a cross-border payment system that maintains compliance with existing correspondent banking frameworks. Project Agora involves collaboration with central banks from the United States, United Kingdom, Japan, and other nations, excluding any BRICS members. By maintaining the correspondent banking system, Agora aims to create a “Finternet,” a compliant digital finance ecosystem that respects international sanctions and financial regulations.

With BIS’s exit, Project mBridge will be carried forward by its founding members, with the central banks of China, Hong Kong, Thailand, and the UAE remaining primary stakeholders. The project’s progress remains gradual, as Carstens remarked, “mBridge is not mature enough to start operating. So many, many years need to happen.”

Cointelegraph Article

Current
Price

Current Block Height

Current Mempool Size

Current Difficulty

Subscribe