The Bank for International Settlements (BIS) has finally decided to abandon its participation in Mbridge, a project launched in 2021 that aimed to establish a parallel, central bank digital currency (CBDC) based system for international settlements. The decision was taken after the institution examined the possible Mbridge uses for facilitating trade between countries of the BRICS bloc, sidestepping Western sanctions enforced on traditional finance rails.

Explaining the reasons behind BIS’ decision, General Manager Agustin Carstens pointed in the direction of BRICS. At a recent event in Madrid, he stated:

Mbridge was not created to serve the BRICS. Nothing we do should be a conduit to violate sanctions.

Carstens reinforced that Mbridge was still in its nascent stages and was not ready for prime-time use from the nations taking part in the initiative, including the UAE, China, Hong Kong, Thailand, Saudi Arabia, and the BIS Innovation Hub. Nonetheless, he added that these partners were free to carry on the project by themselves.

While the project has not reached a wide implementation, the basic functionality for completing international settlements is already there, as it reached the minimum viable product (MVP) stages. This means that each one of the nations already has a validating node in Mbridge’s system, allowing them to verify and conduct transactions on the network.

Read more: Cross Border CBDC Project Mbridge Enters MVP Stage

In addition, the UEA has already used the network for making the first digital dirham settlement, disbursing ($13.6 million) directly to China.

Read more: Project Mbridge Reaches Milestone: First Digital Dirham Cross-Border Settlement Goes Through

BIS’ decision comes after deliberations on its involvement in the project. Recently, Carstens warned about the implications of the institution’s participation in an initiative that could potentially help BRICS nations like Russia sidestep economic sanctions. “We cannot directly support any project for the BRICS because we cannot operate with countries that are subject to sanctions — I want to be very clear about that,” he detailed.

Read more: BIS Considers Ending Mbridge Project Over BRICS Connections, but Is It Too Late?

Writers’ take: BIS’ actions are irrelevant to constructing an alternate financial system using digital assets. Mbridge or not, countries seeking to trade freely will find a way to conduct international payments as many BRICS countries already do. Nonetheless, the measure reinforces the relevance of these assets to balance the scales in the payments and trade arena.

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