The mBridge and the new financial architecture (Part 2 of 2)

The mBridge and the new financial architecture

(Part 2 of 2) [1]

Jennifer Montoya[2], OBELA[3]

The mBridge project could change the international financial architecture, currently dominated by the United States Federal Reserve (FED). It seeks to streamline transactions through central bank digital currencies (CBDCs) in real time, eliminating the need for a third currency or payment systems. The project faces several obstacles, including the perception of the dollar's irrelevance as a means of payment and the Trump administration's aggressive response with high tariffs on nations that wish to use it. In addition to this, there are technical limitations and mistrust of the project itself. To understand how mBridge works, see "mBridge and the New Financial Architecture" (Part 1 of 2). This article will analyse mBridge's potential for a new global financial architecture, the challenges it faces and its global implications. 

The mBridge offers significant advantages in the field of trade and as an international payment system. It facilitates direct transactions with CBDCs, reducing costs and exchange rate volatility. Moreover, it streamlines cross-border payments, eliminating the need for any payment system, thereby promising a more efficient and cost-effective financial landscape.[4], which requires international reserves in those currencies. With this, the platform offers the possibility of evading Western sanctions, making it attractive to the 19 countries sanctioned by the US and the European Union.

Unlike cryptocurrencies such as Bitcoin, it would operate in a regulated manner. Being centralised, blockchain technology offers transparency and facilitates the tracking of each transaction by the respective central banks. It would make money laundering difficult. mBridge would offer greater surveillance and regulation mechanisms to national central banks and stability at the international level. 

The project poses a challenge to the dollar and its role as a global reserve currency. When transactions are in CBDCs, demand for dollars would be affected. If the system manages to expand as intended, central banks could increase their reserves in CBDCs. In the medium term, the dollar would remain the reserve currency, due to the amount of dollars circulating in the global economy.

Transactions with mBridge are held with automatic conversion from one digital currency to another, reducing the need for a third currency to stabilise the exchange rate. Exchange rate stabilisation mechanisms could remain in place, such as the Fed's SWAPs with Mexico and Brazil and the BPdC's SWAPs with Argentina, as well as those in Latin America and Africa.

Mass adoption and its attempt to transform the current financial system are far from a reality. It still faces geopolitical, technical, and structural challenges that could limit its impact. Among these is its limited adoption, currently to five central banks, all in the East. In turn, the US could become the most significant obstacle, not only because of the direct challenge to the dollar, but also because of its control over international payment systems. Trump has already exerted pressure by threatening to sanction any country that dares to implement a system like this, as he has already done with BRICS member countries and allies. For example, in January 2025, Trump announced that he would impose 100% tariffs if they moved away from the dollar.

Among the technical limitations is the issue of each country's legal framework and the need to adapt to a common one. As of August 2025, five central banks have adapted, but with the incorporation of new countries, this becomes more complicated.   

To the question, who would resolve a dispute over the use of mBridge? In the current financial system, the authority responsible for resolving these conflicts is the IMF, which acts in its multilateral capacity. In the case of mBridge, central banks would regulate them, but it is unclear who to turn to in the event of a conflict. One possibility would be the BRICS Contingency Reserve Agreement, provided that all countries join the project. The problem is that the bloc has in the pipeline the BRICSpay project, a multilateral payment system with QR codes in local currencies.

At the end of 2024, the BIS abandoned the project, leaving it in the hands of the five member central banks. Although it stressed that this was not due to political issues, it is clear that the project conflicts with the current financial architecture. The institution itself was unhappy with the possible use of the platform to evade US and EU Financial sanctions. The project plans to expand in 2025, with the likely integration of Russia and Saudi Arabia. This mechanism allows for savings of x% on each transaction compared to SWIFT.

The mBridge, along with the BRICSpay initiative, could potentially pave the way for a multipolar financial system. By making transactions cheaper without the use of a third currency, it challenges US dominance in the international financial architecture. There is a growing trend towards a new global economic architecture centred on Asia, despite its current limitations, holding significant potential for the future.