My Take | A global financial war has just escalated on a new digital front
Washington wants to kill an international pilot payment system that can bypass the US dollar and banks, but the genie is already out of the bottle
While the Brics summit last week attracted global media attention, the International Monetary Fund (IMF) and World Bank held their much quieter annual meetings in Washington. But one of their discussions on agenda – or rather a decision likely already made – may be as momentous as anything coming out of the Russian city of Kazan.
It has to do with whether the Bank for International Settlements (BIS) should end a pilot global payments platform it has sponsored called mBridge. Hong Kong is also a participant.
The cross-border platform enables economies around the world to trade with each other using multiple CBDCs – or central bank digital currencies. Any country that has developed its own CBDC could in principle join it. In effect, they won’t need to use the US dollar to transact with each other, and therefore can bypass US banks.
At least in theory, no single world or national authority will be able to track or intercept such transactions, unlike the current situation such as with Swift, the international financial messaging system that has been exploited by US authorities and made their messages an open book to them.
Now you see why Washington doesn’t like mBridge or any system like it. What is worse is that mBridge is partly based on blockchain technologies already developed and in use in China. It’s remarkable that the BIS even agreed to such an experiment in the first place.
Even though it’s supposed to be the central bank for other central banks around the world, it’s long been dictated by Western agendas much like the other Bretton Woods institutions – the IMF and World Bank. One theory about why the BIS has gone along with the pilot scheme to this late stage is that Western authorities wanted to dive deep into its mechanics before nixing it.
Washington’s war on the 5G business of Chinese telecoms and especially Huawei is instructive here. It has made clear it will not tolerate the use of Chinese gear installed deep in the plumbing of global telecoms and internet systems. The ostensible reason is that the Chinese may use it to spy on others. The real reason is that the Americans may not be able to penetrate such gear as they do now.
