News
Saudi Arabia Joins the Wrong Blockchain…
3h00 ▪ 7 min read ▪ by Nicolas T.
Saudi Arabia has joined the new project of the international payment system mBridge. A step towards the end of the petrodollar and bitcoin…
mBridge
The Bank for International Settlements (BIS) and the central banks of China, Hong Kong, Thailand and the United Arab Emirates have been working on the mBridge project for over three years.
It is an international payment system that uses central bank digital currencies (CBDC). China is the main architect of this project that could rival the SWIFT network.
At its core is a blockchain that enables instant cross-border payments via so-called atomic payments and foreign exchange transactions.
The term atomic simply means that, similar to bitcoin, payments are irreversible. They don’t depend on a financial maze that can take several days to confirm a payment. Either the payment is instant, or it doesn’t happen.
Transactions are conducted via the “HotStuff” consensus mechanism. This same mechanism was intended to be used by Facebook’s Libra project and is used by Ethereum for its Staking protocol. It is essentially an alternative to Bitcoin’s Proof-of-Work mechanism. The Dashing protocol is also being evaluated.
MBridge recently reached a significant milestone with the completion of its prototype and Saudi Arabia’s decision to join the project. According to BIS, the four central banks have each deployed a validation node, and some commercial banks have already conducted test transactions. The Chinese giant Ten hundredth has been involved since September 2023. The company participates in the validation of use cases for cross-border payments, as well as in the development of the platform.
Saudi Arabia backs its bets
The kingdom’s integration into the BRICS club is far from trivial. Member countries clearly express their intention to eliminate the dollar from their trade. The arrival of the Saudis could mean that one day Saudi oil exports to China could be done via the mBridge blockchain, in yuan.
Recall that Chinese President Xi Jinping asked the Gulf countries in November 2022 from Riyadh to accept the Chinese yuan as payment. Another unmistakable sign is that the central banks of both countries recently signed a currency swap agreement worth 50 billion yuan ($7 billion) in November 2023.
But who knows what the United States might decide to do if the petrodollar were abandoned? It is a coincidence that the American television channel CBS just revived allegations of Saudi government complicity in the September 11, 2001 attacks? It is also a coincidence that the Saudi Defense Minister visited China this week?
The Central Bank of the United Arab Emirates and the People’s Bank of China also signed an agreement agreement renew a currency swap to improve cooperation in the development of central bank digital currencies.
These maneuvers must be seen in parallel with Vladimir Putin’s statements at the St. Petersburg Economic Forum:
“BRICS countries are working on their own payment system, free from political pressure, abuse… and external interference.”
It is very likely that the Russian president is referring to mBridge here. The Russian Central Bank already has its own CBDC.
Who will control mBridge?
Will the mBridge payment system support the dollar? For now, the dollar does not exist in the form of a CBDC. Donald Trump also stated that there will be no CBDC if he is elected.
But here’s what we can read about it website of the American central bank:
“Although the Federal Reserve has not made any decisions on issuing a central bank digital currency (CBDC), we have explored the potential benefits and risks of CBDCs from various perspectives, including through research and technology experimentation.”
Furthermore, it should be noted that the BIS – which oversees the mBridge project – is a Western-style institution based in Switzerland. Not to mention that the IMF, ECB and New York Fed are among the “observer members”.
Cristina Lagarde said on June 24 that the ECB had made “significant progress towards being ready to issue a digital euro, if necessary”.
Finally, all of this must be placed in the context of political tensions that unfortunately remain vivid. An escalation of sanctions could lead to the disconnection of other countries from the SWIFT network and a further freeze of foreign exchange reserves. The mBridge network could therefore become a fallback option.
The backup plan that has given good results for over 15 years is obviously Bitcoin…
Bitcoin > Ponte m
Bitcoin is both a currency and a payment network, two in one. It is also a neutral and stateless store of value. No nation can use it as a geopolitical weapon.
Here is the opinion of Michael Saylor about this:
“The global banking system is tied to a fiat asset, the dollar, which is falling 7 to 10% a year and is overseen by the Fed. This does not mean that banks are bad per se. The problem is that we have a single toxic asset. [the dollar]. A fragile asset because it is centralized. Imagine a world where 50,000 banks use bitcoin with peer-to-peer agreements between them. Ask the Australian bank, the Austrian bank, or the Chinese bank if they wouldn’t like to have an asset that doesn’t lose 7 to 10 percent of its value every year. Ask them if they wouldn’t like to be able to transact with any other bank in the world, peer-to-peer. It’s an improvement over the existing system.”
The world is tired of financing American debt. The current cold war climate is largely related to the dollar’s infamous exorbitant privilege. Calm will return only with a new international monetary system. Also Pope francesco calls for a “new international financial architecture”.
In other words, Washington will have to agree to abandon the monetary hegemony inherited from the end of the Gold Standard.
And what better than bitcoin to replace it?? MBridge would simply repaint the existing system. Only one network can resist censorship, and that network is called Bitcoin.
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Nicolas T.
Journalist expert in Bitcoin, geopolitics, economics and energy.
DISCLAIMER
The views, thoughts and opinions expressed in this article are solely those of the author and should not be relied upon as investment advice. Do your research before making any investment decisions.