Saudi Arabia has joined the new international payment system project mBridge. A step closer to the end of the petrodollar and bitcoin…
mBridge
The Bank for International Settlements (BIS) and the central banks of China, Hong Kong, Thailand, and the United Arab Emirates have been working on the mBridge project for over three years.
It is an international payment system using central bank digital currencies (CBDC). China is the chief architect of this project which could rival the SWIFT network.
At its core is a blockchain enabling instant cross-border payments via so-called atomic payments as well as foreign exchange operations.
The term atomic simply means that, similar to bitcoin, the payments are irreversible. They do not depend on a financial maze that can take several days to confirm a payment. Either the payment is instantaneous, or it does not happen.
Transactions are conducted through the “HotStuff” consensus mechanism. This same mechanism was to be used by Facebook’s Libra project and is used by Ethereum for its Staking protocol. It is essentially an alternative to Bitcoin’s Proof-of-Work mechanism. The Dashing protocol is also under consideration.
MBridge recently reached a significant milestone with the completion of its prototype and Saudi Arabia’s decision to join the project. According to BIS, the four central banks each deployed a validation node, and a few commercial banks have already conducted test transactions. The Chinese giant Tencent has been involved since September 2023. The firm participates in validating use cases for cross-border payments as well as in the development of the platform.
Saudi Arabia backs its bets
The kingdom’s integration into the BRICS club is far from trivial. Member countries are clearly expressing their intention to purge the dollar from their exchanges. The arrival of the Saudis could mean that Saudi oil exports to China could one day be conducted via the mBridge blockchain, in yuan.
Let’s recall that Chinese President Xi Jinping called in November 2022 from Riyadh for Gulf countries to accept the Chinese yuan in payment. Another unmistakable sign is that the central banks of both countries recently signed a currency swap agreement worth 50 billion yuan ($7 billion) in November 2023.
But who knows what the United States might decide to do if the petrodollar is abandoned? Is it a coincidence that the American TV channel CBS has just resurrected accusations of Saudi government complicity in the September 11, 2001 attacks? Is it also a coincidence that the Saudi Defense Minister visited China this week?