During last week’s FinTech Symposium in Hong Kong’s Science and Technology Week, China unveiled new developments in their central bank digital currency project.

Mu Changchun, Digital Currency Institute lead at the People’s Bank of China, revealed that China has completed testing for the blockchain that their CBDC will be based on, known as the Money Bridge or mBridge.

According to the new update, the blockchain’s source code will be fully inspectable, verifiable, and open for audit by all central banks and monetary authorities involved in the project.

Thus far, several central banks have signed up, including the Hong Kong Monetary Authority, Bank of Thailand, and the Central Bank of the United Arab Emirates.

Additionally, the mBridge project has already carried out pilot tests involving eight commercial banks, where cross-border payments, foreign exchange transactions, and interbank dealings were successfully carried out.

The End of Dollar Dominance?

Notably, however, the Federal Reserve is not directly involved in the mBridge project. Instead, the Federal Reserve Bank of New York is merely an observer in the project.

On the contrary, many of the active participants are ones that would benefit directly from the undermining of USD dominance in the global financial system.

The mBridge project is dominated by Asian and Middle Eastern countries, all of whom have made moves away from the Western-dominated financial system. The oil-producing Middle-Eastern countries for example have begun to accept Chinese Yuan for their oil, when they had previously only accepted USD for oil.

And Southeast Asian countries like Indonesia and Malaysia have also tried to reduce their dependence on the US Dollar by creating regional or bilateral currency swap agreements that would allow them to band together in the case of a financial crisis.

The mBridge project would draw many of these countries closer to China, and allow for them to strike a balance between depending on the Chinese Yuan and the US Dollar. In particular for Southeastern and Eastern Asia, collaboration on the mBridge project can allow them to better execute currency swaps in times of crisis.

In return, Chinese investment, including as part of the Belt and Road Initiative, might be more forthcoming as China seeks to expand its influence in the region. In some sense, collaboration on the mBridge project can prove to be beneficial for all parties involved, with the exception of the US, which has enjoyed exorbitant privilege under a financial system that they have enforced since 1945.

With the mBridge project, this era may finally come to an end, and a more multipolar world may be on the horizon.