mBridge, a Bank of International Settlements Project Hyped by BRICS Fans as a Way to Evade Sanctions, Shut Down

Back in the stone ages when yours truly stated blogging, the practitioners, economists, and journalists covering the world of finance, and most of all those worried about the dangerously large housing and derivatives bubbles in the US and elsewhere cared deeply about accuracy, to the point of sometimes having very heated arguments among our sites (and this was among people with intellectual integrity; beating up on the likes of Andrew Ross Sorkin fell in a different category). A case study in how much the world has changed, and how promoting narratives (boy do I hate that word) trumps getting things right is mBrigde, a BIS project that just got canned.

The reason mBridge is an object lesson is that BRICS new currency/new payments system fanbois would regularly show up in comments flogging it when it was not mentioned in any posts. They presenting mBridge as a BRICS solution to its payments system, as in “slipping the noose of dollar sanctions” needs.

Those in possession of an operating brain cell and a search engine could see this idea was bogus. mBridge was developed under the auspices of the Bank of International Settlements, as in a part of the current central bank architecture, with Collective West and BRICS institutions as members. “Observing members” as in probable early adopters, include the European Central Bank, International Monetary Fund, Federal Reserve Bank of New York, and World Bank. This was most assuredly not a BRICS project. No way, no how is the BIS going to be facilitating a scheme to promote making payments outside the dollar system; at best, it that happened, it would have been a bug, not a feature. And mBridge was only in the testing phase.

Nevertheless, a sampling of comments we rebutted:

Godfree Roberts
September 5, 2024 at 8:56 am

Note the crypto-blockchain whiz bangery is not a part of this, although it could be grafted on for sex appeal.

The digital platform for trade settlement in domestic currencies, mBridge, uses blockchain. Thailand and several other countries have been using it for 2 years and it works smoothly. It will be open to all BRICs members this coming January 1. Expect a stampede.

We had to point out that the “using it for 2 years” and “open to all BRICS members…January 1” were complete falsehoods.

Back to examples:

jan krikke
September 23, 2024 at 9:38 am

From the BRICS perspective:

– Bretton Woods was the neo-colonial make-over of the British Empire.
– What unites the disparate BRICS group is a common desire to end the abused dollar hegemony.
– China and other BRICS countries have been buying record amounts of gold in the past few years.
– The price of gold doesn’t go up, the value of fiats is going down – about 25% in the past year or so.
– A trading currency does not have to be backed by gold.
– mBridge is a decentralized multicurrency payment system that can accommodate any currency, including CBDCs.

Krikke tried defending his position by citing an Asia Times story he wrote, which provided no independent confirmation of his (additional) claims about mBridge.

Reader Mikel had a much better grip as to the players and dynamics. From a comment last October:

Mikel
October 30, 2024 at 11:52 am

The U.S. Shouldn’t Dismiss BRICS Challenge – Carnegie Endowment for International Peace

Well, it hasn’t been dismissed as a challenge:
https://www.bnnbloomberg.ca/business/international/2024/10/28/bis-debates-ending-project-eyed-by-putin-to-undermine-dollar/
(Bloomberg) — The Bank for International Settlements is debating whether to shut down a pilot cross-border payments platform after Russia’s President Vladimir Putin identified the underlying technology as a tool to circumvent sanctions and potentially undermine the dollar’s dominance in the global financial system.

The mBridge project — which promises to allow sending money around the world without relying on US banks — was among topics discussed by central banks and finance chiefs at last week’s annual meetings of the International Monetary Fund and World Bank in Washington, according to people informed about the talks. Shutting it down was among the options, the people added, asking not to be named discussing confidential deliberations…”

“…Putin’s embrace is pushing officials to quickly reconsider the whole endeavor. Still, it’s unclear whether a BIS shutdown of the mBridge project could effectively stop participating central banks from putting the technology to use. Some countries might decide to carry on even without the Basel-based institution, according to a person familiar with the project…”

And from Bloomberg earlier this week, in Central Bank Backlash Against BIS Innovation Hub Is Growing:

The Bank for International Settlements faces mounting pressure to revamp its internal think tank devoted to driving technological change in central banking, according to people familiar with the matter….

Controversy around mBridge — a cross-border payments pilot that the BIS abandoned after it emerged as a tool for Russia to evade sanctions — rocked governors’ confidence in the hub, one person said. They are also preoccupied with other issues and have less appetite for blue-sky initiatives, according to the person.

And a tweet from a party with direct contact with BIS Innovation Hub initiatives went even further than I had guessed, confirming that they were intended to preserve and extend US financial hegemony. The money quotes from the blue checked, as in verified, Kathleen Tyson (I did not embed because readers would have to click through to get the juicy bits):

Interesting Bloomberg piece this week on a growing revolt against the BIS Innovation Hub after it pulled the plug on cooperation with mBridge for the risk of sanctions evasion through the platform….

I had some early contact with the BIS Innovation Hub when it was founded and have watched it warily since. It does appear to be a vehicle for filtering and controlling financial technology to perpetuate US hegemony and G7 dominance of global banking….

I sat through various webinars and conferences showcasing what the Hubs are developing. The most terrifying was a New York Fed BIS Innovation Hub cooperation to capture all FX trading globally. FX remains the only unregulated market in the world (because central banks need to intervene and manipulate FX as a method of control/punishment). There is no mandatory reporting of FX trades. The idea that New York Fed would have a monopoly on all FX data capture and AI analysis is truly scary and implies they will target FX for regulation/control shortly. Other initiatives have appeared less scary, but many are impractical, useless in the real world.

So a major aim of the BIS Innovation Hub was to develop Trojan horses for the current financial system. As soon as mBridge was found to have gone off the reservation, it was shut down.

I probably should have given the prophylactic warning. I am not opposed to BRICS. I am opposed to BRICS touts who through naivete or the desire to curry favor with the cool kids, provide lousy information that has the potential to undermine the shift to a multi-polar world by making things seem easier and further along than they are. Even Judge Napolitano, who is not a finance expert, mentioned casually in his last interview with John Mearsheimer that BRICS isn’t developing a new currency, is starting to get a grip on what it will take for BRICS to make progress on the currency/payments front (although then he fell in with booserism by calling BRICS a trade bloc).

The US had staggering advantages in terms of being able to create a new institutional architecture at the end of World War II because it has 50% of world GDP. The downside of multipolarity is multi-party negotiations, which are very difficult to consummate.