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(Kitco News) – The Hong Kong Monetary Authority (HKMA) is preparing to expand its mBridge central bank digital currency (CBDC) project as globalization accelerates and countries around the world make concerted efforts to allow transactions in currencies other than the currency to start is US dollars.

HKMA CEO Eddie Yue delivered the keynote address at the 2023 Bund Summit in Hong Kong on Friday, outlining the central bank’s plans for an interoperable CBDC system in Hong Kong and saying they are looking to onboard new central bank partners.

“Globalization has brought enormous benefits to emerging markets and helped keep global inflation under control,” Yue said. “However, the golden age of globalization has given way to a gradual slowdown in global trade in goods following the 2008 financial crisis. It appears that this slowdown in global trade in goods is likely to continue, allowing trade in services and other flows to take the baton in sustaining globalization.”

Although global trade has slowed, Yue said that “full financial decoupling is also unlikely given the highly interconnectedness of the global financial system.” He urged countries to develop “pragmatic and pragmatic economic considerations” rather than opting for “protectionism and “cross-border restrictions”.

He noted that although some companies have moved production out of China, “it would be difficult to undertake a large-scale relocation.” [the] “China is likely to play an even more important role in shaping regional supply chains in the future,” he said.

Yue said that for Asia to benefit from the “realignment of global value chains” underway, four principles must be followed: “Remain resilient by maintaining sufficient buffers and ensuring that their financial systems are resilient to shocks; Diversifying trade into regions with high growth potential, such as Africa and the Middle East; Develop capabilities, including talent development and development of both physical and digital infrastructure. and promote intensive regional cooperation, particularly in the areas of green technologies and improving the sustainable finance ecosystem in the region.”

As trade and supply chain connections become more integrated in Asia, Yue said local currencies will be used more in regional trade processing and beyond, meaning cross-border payments infrastructure will need to become more efficient to keep up with demand.

“It would be remiss of me not to talk about Hong Kong’s unique advantages and how it can help address the challenges ahead,” he said. “If we want to take advantage of the growth opportunities offered by markets such as ASEAN, the Middle East and Africa, we must not only expand our traditional role as a gateway between East and West, but also expand trade networks and improve logistics infrastructure.”

“To develop capacity and maintain its position as a leading offshore RMB business hub, Hong Kong is working hard on three fronts: liquidity, products and infrastructure,” he said. “The Expanded Currency Swap Agreement with the People’s Bank of China [PBOC] “provides further liquidity support to the offshore market through the RMB liquidity facilities established by the HKMA to meet growing business demand.”

Yue said the mBridge project – a collaboration between the Bank of International Settlements (BIS) Innovation Center, the PBOC, the central banks of Thailand and the United Arab Emirates, as well as commercial banks from each of these jurisdictions – is a key element in the project’s plans HKMA for future expansion.

“Our recent pilot test demonstrated that this central bank digital currency wholesale platform can accelerate cross-border payments at lower costs and with better transparency,” he said. “We expect more central bank colleagues to join this open platform. And very soon we will launch a so-called Minimum Viable Product with the aim of paving the way for the gradual commercialization of mBridge.”

Yue said the hope is that “this new innovative platform will help solve long-standing problems in cross-border payments and improve the efficiency of the global value chain.”

He noted that Hong Kong “recently issued the world’s first tokenized green sovereign bond” and said the experience “offers a glimpse into the power of digitalization to pave the way for a greener, more inclusive and more connected future.”

“Globalization is now at a crossroads,” Yue said. “But with good preparation, the Asia region is well positioned to adapt to changes in the global trade landscape.”

The mBridge project was launched in 2021 with the aim of developing a platform to support cross-border peer-to-peer payments and real-time foreign exchange transactions using central bank digital currencies (CBDCs).

The mBridge platform is a subset of the larger Inthanon-LionRock project, a cross-border distributed ledger technology (DLT) CBDC payment project involving the central banks of Thailand and Hong Kong that launched in September 2019.

However, not everyone is enthusiastic about the mBridge project, including California Rep. Maxine Waters, who warned during recent House Financial Services Committee hearings related to a digital dollar that the mBridge project could be used to circumvent economic sanctions. According to experts, the key to effectively circumventing sanctions through CBDCs is acceptance.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, neither Kitco Metals Inc. nor the author can guarantee this accuracy. This article is for informational purposes only. It is not a request to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no liability for any loss and/or damage arising from the use of this publication.

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