China, Thailand, Hong Kong, and the United Arab Emirates (UAE) are working to develop the mBridge project to challenge US dollar (USD) dominance in international settlements.

The USD has been the preferred choice for cross-border payments or international trade settlements for years. However, with the rise of central bank digital currencies (CBDCs), there are discussions that the USD will no longer remain the dominant currency.

According to Bloomberg, a basic working product for the mBridge will be launched by the end of 2023. mBridge is a digital platform that does not rely on the US banking system for cross-border transactions.

The US dollar is widely used for settlement due to its high liquidity. But, it also possesses some challenges, such that the settlements with USD happens only during US working hours. A holiday in the US or any other involved country can further slow down the settlement process.

However, leveraging blockchain technology, the mBridge platform would push the usage of digital yuan as a USD alternative for international trade settlements.

Talking about mBridge, Thailand’s central bank told Bloomberg:

“mBridge can reduce cross-border transfer times from as many as five days to several seconds. It would also offer more benefit to end-users and commercial banks if there are more participating jurisdictions to join.”

As of Q1 2023, the USD has nearly 60% foreign exchange dominance. However, experts have predicted that the USD will gradually lose its dominance. 

In February 2023, the economist Nouriel Roubini predicted that China’s renminbi and stablecoins would challenge the unipolar regime of the dollar. In June 2023, BeInCrypto reported that six major economies are preparing to reduce their dependency on USD for trade settlements.

Click here to read a comprehensive guide on India’s CBDC, the digital rupee

Also, the Japanese fintech firm Soramitsu is building a cross-border payment system for Asian countries using Cambodia’s CBDC. 

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