The Bank for International Settlements (BIS) says the six-week Project mBridge pilot to evaluate whether CBDC would be useful for foreign exchange transfers has successfully processed 160 payments worth around a total of $22 million from 20 different commercial banks, deeming the project a success.
Central banks – based in Hong Kong, China, the United Arab Emirates and Thailand – issued over $12 million on the platform, allowing the commercial banks to conduct payment and foreign exchange payment versus payment transactions (PvP), the BIS report said.
The pilot was part of BIS’s ongoing Project mBridge, a collaboration between the international financial institution and the central banks of those four nations that is studying CBDCs and their possible role in cross-border payments and multi-CBDC transactions.
The group hinted at the trial in a brief LinkedIn post published last month, but only shared full details ahead of next week’s Hong Kong Fintech Week conference.
Liquidity was one key concern for the banks involved, the report said.
“One important observation is the limited number of FX PvP transactions which were conducted during the pilot compared with one-way payments,” the report said.
“This reflected in part the relatively short window of time banks had to off-load their foreign CBDCs due to the requirement set by some central banks to clear balances of their CBDCs at the end of the day, along with the limited overlapping RTGS [real-time gross settlement] hours between the four jurisdictions.”
According to the document published Wednesday, one issue the banks found was that the on-bridge transactions lacked “an efficient FX price-discovery mechanism.”
The FX rates were instead determined off-bridge, before the transactions occurred, which led to the banks needing to tap preexisting balances in nostro accounts rather than using mBridge itself.
“Given the need to rely on existing correspondent banking relationships for liquidity, the real-value nature of transactions and the short time span of the pilot, transactions took place, for the most part, between banks with pre-existing business and service relationships,” the report said.