By George Ward
Belarus Forges Ahead With Digital Ruble Development
In a move towards modernizing its financial infrastructure and reducing dependency on traditional fiat currencies, Belarus is rapidly progressing towards launching its Central Bank Digital Currency (CBDC), the digital Belarusian ruble.
This innovative initiative, powered by the open-source Hyperledger Fabric blockchain network, marks a significant milestone in the country’s journey towards embracing blockchain technology. According to reports, the National Bank of Belarus, in collaboration with the Center for Banking Technologies, has commenced the development of a platform for this purpose.
Belarus’s CBDC Initiative And De-dollarization Efforts
Meanwhile, the governing board of the National Bank convened for an extended meeting to deliberate on the imminent launch of the digital ruble. Dmitry Kalechits, the Deputy Chairman of the Board, highlighted the project as a critical driver of growth and innovation within the payment sector.
The decision to launch a CBDC aligns with Belarus’s broader objectives of diversifying its international payment mechanisms and reducing reliance on traditional currencies, particularly the US dollar. Senior figures within the National Bank have repeatedly emphasized the potential of the digital ruble to facilitate cross-border payments, positioning Minsk as a progressive player in the global financial landscape.
The digital ruble project represents a concerted effort by Belarus to emulate the success of other nations that have embraced CBDC technology. Notably, the central bank has drawn inspiration from Moscow and Astana, which have recently accelerated their CBDC plans.
Belarus plans a test version of the digital ruble, with initial transactions limited to a select group of participants, including commercial banks and individual users. Furthermore, Belarus’s pursuit of a CBDC is partly driven by geopolitical considerations, particularly Western sanctions.
The choice of Hyperledger Fabric as the underlying blockchain technology underscores Belarus’s commitment to leveraging cutting-edge solutions for its national digital currency infrastructure.
Notably, other central banks, including Russia and Brazil, have also indicated interest in adopting Hyperledger-powered CBDCs, signaling a broader trend toward interoperability among these CBDCs
UAE Makes Historic Cross-Border CBDC Payment
In a related development, the United Arab Emirates (UAE) marked a significant milestone regarding CBDCs after it performed its first-ever cross-border payment to China using the digital Dirham. The transaction, totaling Dirham 50 million (equivalent to $13.6 million), was completed yesterday, ushering in a new era of financial inclusion between the two nations.
The momentous event occurred through the mBridge cross-border CBDC platform, a collaborative endeavor involving the UAE, Hong Kong, China, and several other central banks. Recall that the UAE and China forged an agreement last year to foster digital currency payments, with that agreement resulting in this historic cross-border transaction.
Notably, the timing of the transaction coincided with the eve of the first BRICS meeting following the expansion of its membership from five to ten countries, with the UAE joining at the beginning of the year.
The Role of mBridge
Symbolically, the move aligns with the aspirations of BRICS members to reduce reliance on the US dollar, a vision they aim to achieve through the mBridge platform. While the mBridge project is not yet fully operational, plans are underway to launch a minimum viable product (MVP) later this year, pending further assessments by regulatory bodies.
Central bank digital currencies offer numerous advantages for cross-border payments, chief among them eliminating the need for a correspondent banking system, often characterized by inefficiencies and delays.
According to insights shared by the Deputy Director of China’s Digital Currency Research Institute (DCRI), mBridge transactions boast an impressive turnaround time of just seven seconds and reduce costs by up to 50%. Despite these promising advancements, there are still numerous challenges.
A recent report from the Carnegie Endowment highlighted concerns regarding foreign exchange (FX) costs, particularly the liquidity of the US dollar. With FX expenses constituting a significant portion of cross-border payment costs (including 60% for peer-to-peer (P2P) transactions and 97% for peer-to-business (P2B) transactions), addressing these challenges will be paramount for the success of platforms like mBridge.