mBridge: A Step Closer to the End of the Petrodollar and Bitcoin

The Bank for International Settlements (BIS) and the central banks of China, Hong Kong, Thailand, and the United Arab Emirates have been working

Saudi Arabia has joined the new international payment system project mBridge, a step closer to the end of the petrodollar and bitcoin…

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.

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?

The Central Bank of the United Arab Emirates and the People’s Bank of China also signed an agreement to renew a currency swap to enhance cooperation in the development of central bank digital currencies.

These maneuvers must be viewed in parallel with Vladimir Putin’s statements at the St. Petersburg Economic Forum:

“The BRICS countries are working on their own payment system, free from political pressures, abuses… and external interference.”

It is highly likely that the Russian president is referring to mBridge here. The Russian central bank already has its own CBDC.

Will the mBridge payment system support the dollar? For now, the dollar does not exist in CBDC form. Donald Trump, moreover, has stated that there will be no CBDC if he is elected.

However, here is what we can read on the website of the American central bank:

“Although the Federal Reserve has made no decision on whether to issue a central bank digital currency (CBDC), we have been exploring the potential benefits and risks of CBDCs from various angles, including through technological research and experimentation.”

Furthermore, it should be noted that the BIS – which oversees the mBridge project – is an institution with Western allegiance based in Switzerland. Not to mention that the IMF, ECB, and New York Fed are among the “observer members”.

Christine Lagarde stated on June 24 that the ECB has made “significant progress to be ready to issue a digital euro, if necessary”.

Finally, all this must be placed in the context of political tensions that unfortunately remain vivid. An escalation of sanctions could lead to the disconnection of other countries from the SWIFT network and further freezing of foreign exchange reserves. The mBridge network could then become a fallback option.

The fallback plan that has proven itself for over 15 years is obviously bitcoin…

Bitcoin is both a currency and a payment network, two-in-one. It is also a neutral and stateless store of value. No nation can use it as a geopolitical weapon.

Here is the opinion of Michael Saylor on the subject:

“The global banking system is linked to a fiat asset, the dollar, which is collapsing by 7 to 10% per year and is overseen by the Fed. That doesn’t mean banks are bad in themselves. The problem is we have a single toxic asset [the dollar]. An asset that is fragile because it is centralized. Imagine a world where 50,000 banks use bitcoin with P2P settlements with each other