The mBridge blockchain headed by the Bank for International Settlements seems to be in trouble. Good news for bitcoin.
Is the BRI blowing up bridges?
While the BRICS summit was taking place in Kazan, the G7 camp was meeting in Washington for the annual meeting of the International Monetary Fund. According to Bloombergthe famous mBridge project was the subject of negotiations during this meeting of the IMF and the World Bank. The termination of the project would be considered.
Developed under the aegis of the BIS Innovation Hub, mBridge promises to be the new Forex for central bank digital currencies (CBDC). The research is being conducted by the central banks of China, Thailand, Hong Kong and the United Arab Emirates, all members or in the process of becoming members of BRICS.
The objective is to build an alternative system to the current “Correspondent Banking System” which relies largely on the dollar and American banks.
Correspondence banking, in French, amounts to opening an account in a foreign bank to carry out transactions in a local currency (dollar, yen, ruble, etc.). Very concretely this means that if a French bank wants to be able to keep its clients' dollar assets, it will have to open an account in an American bank.
The BRICS consider mBridge as a serious avenue for rebuilding the international monetary system once geopolitical tensions have subsided.
However, it seems that Western decision-makers have not yet resigned themselves to giving up on their monopoly. Disconnecting from global payment networks has become a central weapon in the Western arsenal.
mBridge, the pale copy of bitcoin
Saudi Arabia recently joined the mBridge project, suggesting that China – the project's chief architect – is indeed building an interesting solution.
This is not trivial when we know that Chinese President Xi Jinping called in November 2022 from Riyadh for the Gulf countries to accept the Chinese currency yuan as payment for their oil.
Concretely, mBridge is a blockchain allowing instant cross-border payments as well as foreign exchange transactions. The brief was to create a censorship-resistant system.
Indeed, let's not forget that the G7 froze nearly 300 billion euros and dollars belonging to Russia. The seriousness of this decision cannot be underestimated. This has not gone unnoticed by China and Saudi Arabia who fear being next on the list.
The latest news is that mBridge works with a consensus mechanism known as “HotStuff”. The very one that was considered by Facebook (Libra) and which Ethereum uses for its Staking protocol. In essence, it is an alternative to the Bitcoin Proof-of-Work mechanism.
Unfortunately, the BIS now finds itself in a delicate position, torn between its desire to bring about CBDCs and complex geopolitical realities. A possible shelving of the mBridge project is all the more likely as Donald Trump is categorically opposed to CBDCs.
“A CBDC would give the federal government absolute control over your money. This is a dangerous threat to freedom and I will prevent it from coming to America.”did he declared at the start of the year.
And here for Anglophiles is what the boss of the BIS declared in 2020 about CBDCs:
What about Bitcoin?
Donald Trump will probably end the war in Ukraine. However, it is also likely that a trade war involving tariffs will ensue.
Tensions, even if less serious, will therefore remain. The Republican candidate has also threatened to implement 100% customs duties against countries that refuse to place their reserves in American debt.
In other words, if the BRICS persist in their strategy, their trade with the United States will decline. Washington will have no choice but to reduce its trade deficit to protect the greenback's exchange rate.
This would, in a way, be the end of “the end of the Bretton Woods system” which allowed the United States to print money to benefit from a chronically deficit trade balance.
Renouncing this exorbitant privilege would in some way constitute the resurgence of the spirit of Bretton Woods. Clearly, trade balances would be settled again in a true store of value. However, it is difficult to see how gold could make a comeback in a world where bit is king.
Donald Trump seems to understand that bitcoin is the best store of value in the world. His promise to constitute a strategic reserve of bitcoins could be a profitable poker move.
Bitcoin currently weighs less than 10% of the capitalization of gold. Accumulating a million BTC before the rest of the world will make the pill of the inexorable decline of the outrageous American monetary hegemony pass.
The transformation of the dollar into a political weapon has dug its grave. The world will sooner or later obtain its absolute and stateless store of value. Bitcoin appears more than ever as a more realistic solution than CBDCs.
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