Blockchain-Powered mBridge Project Aims to Establish Chinese Yuan as US Dollar Alternative

August 11, 2023

By Sharan Kaur Phillora

China, in collaboration with Thailand, Hong Kong, and the UAE, is pioneering the mBridge initiative in an ambitious bid to contest the longstanding US dollar (USD) supremacy in international settlements.

Here’s what we know: 

Historically, the USD has been the quintessential choice for cross-border transactions and international trade settlements. However, the popularity and adoption of central bank digital currencies (CBDCs) are now challenging this status quo. The digital yuan, backed by China, emerges as a frontrunner in this race.

Bloomberg reports indicate that a foundational version of the mBridge, a digital transaction platform independent of the US banking system, is slated for a launch by the end of this year. One of the limitations of the current USD-based settlement system is its operation confined to US business hours. This causes delays during US holidays or those of involved nations.

Harnessing the potential of blockchain technology, the mBridge platform aspires to position the digital yuan as a formidable contender to the USD in global trade settlements. In a statement to Bloomberg, the Central Bank of Thailand elucidated, “mBridge can diminish cross-border transfer durations from a lengthy five days to mere seconds. The system’s efficacy would be augmented with the inclusion of more jurisdictions.”

By Q1 2023, the USD still boasted a dominant 60% share in foreign exchange. Nonetheless, projections suggest a gradual shift from this dominance. Nouriel Roubini, a renowned economist, forecasted in February 2023 that China’s renminbi, along with stablecoins, would pose a significant challenge to the dollar’s reign. 

This sentiment is echoed by June 2023 reports from BeInCrypto, which highlight efforts by six major economies to decrease their USD reliance. Additionally, Japanese fintech giant, Soramitsu, is crafting a cross-border payment mechanism harnessing Cambodia’s CBDC for Asian nations.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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