(Bloomberg) -- The Bank for International Settlements is leaving a project for digital cross-border payments after Russia’s president Vladimir Putin identified the underlying technology as a tool to circumvent sanctions and potentially undermine the dollar.
The countries behind project mBridge — China, Thailand, Saudi Arabia, Hong Kong and the United Arab Emirates — will now keep pursuing it on their own. China supplied the platform’s key technological backbone.
“The partners can carry it on by themselves,” BIS General Manager Agustin Carstens said on Thursday at an event in Madrid. He said the decision wasn’t taken because of political considerations.
The mBridge project came under the spotlight at this month’s annual meetings of the International Monetary Fund and World Bank after Putin pitched the idea of a comparable system for the BRICS group of countries to connect their financial systems.
mBridge promises to allow sending money around the world outside of the current system of correspondent banks — which is heavily reliant on the dollar and therefore potentially the target of US sanctions. The system, which had been developed under the aegis of the BIS Innovation Hub, recently reached the “minimum viable product” stage, meaning it’s ready for testing in the real world.
“With respect to political aspects, the noise out there, mBridge is not the ‘BRICS Bridge’, I have to say that categorically,” Carstens said. “mBridge was not created to cater to the needs of the BRICS. It was put together to satisfy broad central bank necessities.”
Carstens said that even if mBridge is now mature enough for the BIS to retreat, it’s still “many years away” from being ready to start operating. He added that the Basel-based institution always tries to be a “good global citizen” and that “whatever products we put together should not be a conduit to violate sanctions.”
(Updates with more Carstens quotes from third paragraph)
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